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Household Risk Taking after the Financial Crisis

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  • 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.

Suggested Citation

  • Sarah Necker & Michael Ziegelmeyer, 2014. "Household Risk Taking after the Financial Crisis," BCL working papers 85, Central Bank of Luxembourg.
    • Handle: RePEc:bcl:bclwop:bclwp085
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    More about this item

    Keywords

    Financial and economic crisis; risk preferences; stock market expectations; wealth fluctuations; emotions;
    All these keywords.

    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

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