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Financial Risk Aversion, Economic Crises and Past Risk Perception

Author

Listed:
  • Alessandro Bucciol

    (Department of Economics (University of Verona))

  • Raffaele Miniaci

    (University of Brescia)

Abstract

We use a panel dataset from the Dutch Household Survey, covering annually the period 1993-2011, to analyze whether individual risk aversion changes over time with the background economic conditions. Considering six different measures of self-assessed risk aversion, which cover different aspects of risk, our preliminary results show that risk aversion is not stable over time. Its dynamics, however, depends on the type of investor. Those who made no investment in the previous year showed higher risk aversion at the end of the 90s; those who invested, in contrast, showed a steadily constant or decreasing pattern. The gap between the risk aversion of investors and noninvestors was the largest between the end of the 90s and the beginning of the 00s, when the stock market experienced exceptionally high volatility.

Suggested Citation

  • Alessandro Bucciol & Raffaele Miniaci, 2012. "Financial Risk Aversion, Economic Crises and Past Risk Perception," Working Papers 28/2012, University of Verona, Department of Economics.
    • Handle: RePEc:ver:wpaper:28/2012
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    References listed on IDEAS

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    1. Das, Marcel & van Soest, Arthur, 1999. "A panel data model for subjective information on household income growth," Journal of Economic Behavior & Organization, Elsevier, vol. 40(4), pages 409-426, December.
    2. Alessandro Bucciol & Raffaele Miniaci, 2011. "Household Portfolios and Implicit Risk Preference," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1235-1250, November.
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    11. Bucciol, Alessandro & Miniaci, Raffaele & Pastorello, Sergio, 2017. "Return expectations and risk aversion heterogeneity in household portfolios," Journal of Empirical Finance, Elsevier, vol. 40(C), pages 201-219.
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    Cited by:

    1. Timothy King & Jonathan Williams, 2013. "Bank Efficiency and Executive Compensation," Working Papers 13009, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    2. Hardardottir, Hjördis, 2016. "Long Term Stability of Time Preferences and the Role of the Macroeconomic Situation," Working Papers 2016:5, Lund University, Department of Economics, revised 29 Aug 2016.
    3. Alessandro Bucciol & Luca Zarri, 2013. "Financial Risk Aversion and Personal Life History," Working Papers 05/2013, University of Verona, Department of Economics.

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    Keywords

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    JEL classification:

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

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