IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Household Risk Taking after the Financial Crisis

Author Info

Listed author(s):
  • Sarah Necker

    ()

  • Michael Ziegelmeyer

    ()

Abstract

This study investigates whether and how the crisis in 2008/2009 affects households' risk attitudes, subjective risk and return expectations, and planned financial risk taking using the German SAVE study. Households' wealth change from end-2007 to end-2009 is not found to have an effect. However, households that attribute losses to the crisis decreased their risk tolerance and planned risk taking; the probability of expecting an increase in risks and returns is raised. According to economic theory, wealth changes attributed to a dramatic event should not have a different effect than other wealth changes. The results suggest an emotional reaction.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bcl.lu/fr/Recherche/publications/cahiers_etudes/85/BCLWP085.pdf
Download Restriction: no

Paper provided by Central Bank of Luxembourg in its series BCL working papers with number 85.

as
in new window

Length: 42 pages
Date of creation: Feb 2014
Handle: RePEc:bcl:bclwop:bclwp085
Contact details of provider: Web page: http://www.bcl.lu/

Keywords: Financial and economic crisis; risk preferences; stock market expectations; wealth fluctuations; emotions;

Other versions of this item:

Find related papers by JEL classification:
  • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
  • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
  • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Daniel Schunk, 2008. "A Markov chain Monte Carlo algorithm for multiple imputation in large surveys," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 92(1), pages 101-114, February.
  2. Lisa Cameron & Manisha Shah, 2015. "Risk-Taking Behavior in the Wake of Natural Disasters," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 484-515.
  3. Tabea Bucher-Koenen & Michael Ziegelmeyer, 2014. "Once Burned, Twice Shy? Financial Literacy and Wealth Losses during the Financial Crisis," Review of Finance, European Finance Association, vol. 18(6), pages 2215-2246.
  4. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, 06.
  5. Michael Hurd & Maarten Van Rooij & Joachim Winter, 2011. "Stock market expectations of Dutch households," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 416-436, 04.
  6. Hui Guo & Robert F. Whitelaw, 2006. "Uncovering the Risk-Return Relation in the Stock Market," Journal of Finance, American Finance Association, vol. 61(3), pages 1433-1463, 06.
  7. Knutson, Brian & Wimmer, G. Elliott & Kuhnen, Camelia & Winkielman, Piotr, 2008. "Nucleus accumbens activation mediates the influence of reward cues on financial risk-taking," MPRA Paper 8013, University Library of Munich, Germany.
  8. Jeff Dominitz & Charles F. Manski, 2011. "Measuring and interpreting expectations of equity returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 352-370, 04.
  9. Sarin, Rakesh K. & Weber, Martin, 1993. "Risk-value models," European Journal of Operational Research, Elsevier, vol. 70(2), pages 135-149, October.
  10. John Y. Campbell, 2006. "Household Finance," Journal of Finance, American Finance Association, vol. 61(4), pages 1553-1604, 08.
  11. Veld, Chris & Veld-Merkoulova, Yulia V., 2008. "The risk perceptions of individual investors," Journal of Economic Psychology, Elsevier, vol. 29(2), pages 226-252, April.
  12. Kuhnen, Camelia M. & Knutson, Brian, 2011. "The Influence of Affect on Beliefs, Preferences, and Financial Decisions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(03), pages 605-626, June.
  13. Lisa Anderson & Jennifer Mellor, 2009. "Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 137-160, October.
  14. repec:hrv:faseco:30747159 is not listed on IDEAS
  15. Kapteyn, Arie & Teppa, Federica, 2011. "Subjective measures of risk aversion, fixed costs, and portfolio choice," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 564-580, August.
  16. Annamarie Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," Working Papers wp108, University of Michigan, Michigan Retirement Research Center.
  17. Hoffmann, Arvid O.I. & Post, Thomas & Pennings, Joost M.E., 2013. "Individual investor perceptions and behavior during the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 60-74.
  18. Thomas Y. Mathä & Alessandro Porpiglia & Michael Ziegelmeyer, 2012. "The Luxembourg Household Finance and Consumption Survey (LU-HFCS): Introduction and Results," BCL working papers 73, Central Bank of Luxembourg.
  19. Elke U. Weber & Richard A. Milliman, 1997. "Perceived Risk Attitudes: Relating Risk Perception to Risky Choice," Management Science, INFORMS, vol. 43(2), pages 123-144, February.
  20. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, Diciembre.
  21. Markus K. Brunnermeier & Stefan Nagel, 2008. "Do Wealth Fluctuations Generate Time-Varying Risk Aversion? Micro-evidence on Individuals," American Economic Review, American Economic Association, vol. 98(3), pages 713-736, June.
  22. Arnaud Reynaud & Stéphane Couture, 2012. "Stability of risk preference measures: results from a field experiment on French farmers," Theory and Decision, Springer, vol. 73(2), pages 203-221, August.
  23. Martin Weber & Elke U. Weber & Alen Nosić, 2013. "Who takes Risks When and Why: Determinants of Changes in Investor Risk Taking," Review of Finance, European Finance Association, vol. 17(3), pages 847-883.
  24. Van de Venter, Gerhard & Michayluk, David & Davey, Geoff, 2012. "A longitudinal study of financial risk tolerance," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 794-800.
  25. Michael D. Hurd & Daniel McFadden & Harish Chand & Li Gan & Angela Menill & Michael Roberts, 1998. "Consumption and Savings Balances of the Elderly: Experimental Evidence on Survey Response Bias," NBER Chapters,in: Frontiers in the Economics of Aging, pages 353-392 National Bureau of Economic Research, Inc.
  26. Luigi Guiso & Monica Paiella, 2008. "Risk Aversion, Wealth, and Background Risk," Journal of the European Economic Association, MIT Press, vol. 6(6), pages 1109-1150, December.
  27. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1996. "Income Risk, Borrowing Constraints, and Portfolio Choice," American Economic Review, American Economic Association, vol. 86(1), pages 158-172, March.
  28. Axel Börsch-Supan & Martin Gasche & Michael Ziegelmeyer, 2010. "Auswirkungen der Finanzkrise auf die private Altersvorsorge," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(4), pages 383-406, November.
  29. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2013. "Time Varying Risk Aversion," EIEF Working Papers Series 1322, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2013.
  30. Joao F. Cocco, 2005. "Consumption and Portfolio Choice over the Life Cycle," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 491-533.
  31. Heaton, John & Lucas, Deborah, 2000. "Portfolio Choice in the Presence of Background Risk," Economic Journal, Royal Economic Society, vol. 110(460), pages 1-26, January.
  32. Péter Hudomiet & Gábor Kézdi & Robert J. Willis, 2011. "Stock market crash and expectations of American households," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 393-415, 04.
  33. Barberis, Nicholas & Shleifer, Andrei & Vishny, Robert, 1998. "A model of investor sentiment," Journal of Financial Economics, Elsevier, vol. 49(3), pages 307-343, September.
  34. Ulrike Malmendier & Stefan Nagel, 2011. "Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 373-416.
  35. Lusardi, Annamaria & Mitchell, Olivia S., 2011. "Financial literacy around the world: an overview," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(04), pages 497-508, October.
  36. Michael Ziegelmeyer, 2013. "Illuminate the unknown: evaluation of imputation procedures based on the SAVE survey," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 97(1), pages 49-76, January.
  37. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  38. Richard Williams, 2006. "Generalized ordered logit/partial proportional odds models for ordinal dependent variables," Stata Journal, StataCorp LP, vol. 6(1), pages 58-82, March.
  39. Kaustia, Markku & Knüpfer, Samuli, 2012. "Peer performance and stock market entry," Journal of Financial Economics, Elsevier, vol. 104(2), pages 321-338.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as
in new window


Cited by:

  1. Ampudia, Miguel & Ehrmann, Michael, 2017. "Macroeconomic experiences and risk taking of euro area households," European Economic Review, Elsevier, vol. 91(C), pages 146-156.
  2. repec:zbw:rwirep:0528 is not listed on IDEAS
  3. Marvin Deversi, 2014. "Do Macroeconomic Shocks Affect Intuitive Inflation Forecasting? An Experimental Investigation," Ruhr Economic Papers 0528, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Deversi, Marvin, 2014. "Do Macroeconomic Shocks Affect Intuitive Inflation Forecasting? An Experimental Investigation," Ruhr Economic Papers 528, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:bcl:bclwop:bclwp085. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.