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Financial Risk Aversion and Personal Life History

Author

Listed:
  • Alessandro Bucciol

    (Department of Economics (University of Verona))

  • Luca Zarri

    (Department of Economics (University of Verona))

Abstract

Though risk attitude is central to economics and finance, relatively little is known about how it is formed and how it changes over time. Based on US data from a dedicated psycho-social module on lifestyle of the 2010 Health and Retirement Study (HRS), we provide new evidence on the correlation between financial risk attitude and life-history negative events out of an individual’s control. Using observed portfolio decisions to proxy for risk aversion, we find correlation with two of such events: having been in a natural disaster and (especially) the loss of a child. These effects survive after controlling for classic socio-demographic determinants of risk aversion.

Suggested Citation

  • Alessandro Bucciol & Luca Zarri, 2013. "Financial Risk Aversion and Personal Life History," Working Papers 05/2013, University of Verona, Department of Economics.
    • Handle: RePEc:ver:wpaper:05/2013
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    References listed on IDEAS

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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How life events shape risk aversion
      by Economic Logician in Economic Logic on 2013-03-22 19:56:00
    2. Entrenching inequality
      by chris dillow in Stumbling and Mumbling on 2013-04-04 19:11:33
    3. Scarred by history
      by ? in Stumbling and Mumbling on 2016-01-27 19:32:00

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    2. Matthieu Gilson & Kim Oosterlinck & Andrey Ukhov, 2015. "Time-Varying Risk Aversion during World War II: Evidence from Belgian Lottery Bond Prices," Working Papers CEB 15-031, ULB -- Universite Libre de Bruxelles.
    3. Su, Zhong-qin & Xu, Yuyang & Xiao, Zuoping & Fung, Hung-Gay, 2020. "Directors’ prior life experience and corporate donations: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    4. Zhidi Zhang & Jianqing Ruan, 2020. "Do Long-Run Disasters Promote Human Capital in China? —The Impact of 500 Years of Natural Disasters on County-Level Human-Capital Accumulation," IJERPH, MDPI, vol. 17(20), pages 1-14, October.
    5. Ateşağaoğlu, Orhan Erem & Torul, Orhan, 2018. "Optimal Ramsey taxation with endogenous risk aversion," Economics Letters, Elsevier, vol. 171(C), pages 87-92.
    6. Ondřej Krčál & Rostislav Staněk & Martin Slanicay, 2019. "Made for the job or by the job? A lab-in-the-field experiment with firefighters," MUNI ECON Working Papers 2019-05, Masaryk University, revised Feb 2023.
    7. Wen, Chufu & Zhao, Xinyu & Xu, Longhao & Yin, Hua, 2023. "Military experience and household stock market participation: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 86(C).
    8. Leilei Gu & Jinyu Liu & Yuchao Peng, 2022. "Locality Stereotype, CEO Trustworthiness and Stock Price Crash Risk: Evidence from China," Journal of Business Ethics, Springer, vol. 175(4), pages 773-797, February.
    9. Yuree Lim & Kyoung Tae Kim, 2019. "Afraid of the stock market," Review of Quantitative Finance and Accounting, Springer, vol. 53(3), pages 773-810, October.

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    More about this item

    Keywords

    Risk Aversion; Financial Asset Ownership; Personal Life History; Behavioral Finance;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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