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Financial Risk Propensity, Business Cycles and Perceived Risk Exposure

Author

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  • Alessandro Bucciol
  • Raffaele Miniaci

Abstract

We analyse whether individual financial risk propensity changes over time with background financial conditions, as well as personal and subjective portfolio risk exposure. We elicit risk propensity from six different self†assessed facets collected in a long panel data set from the DNB Household Survey, annually covering the period 1995–2015. Risk propensity is generally higher during periods of economic growth and lower during periods of recession, but is untrended when elicited, using questions referring to safe investments. Our risk propensity measure is also higher following positive stock market returns or subjectively large risk exposure in own past investments.

Suggested Citation

  • Alessandro Bucciol & Raffaele Miniaci, 2018. "Financial Risk Propensity, Business Cycles and Perceived Risk Exposure," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 80(1), pages 160-183, February.
    • Handle: RePEc:bla:obuest:v:80:y:2018:i:1:p:160-183
    DOI: 10.1111/obes.12193
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    Cited by:

    1. Insoo Cho & Peter F. Orazem, 2021. "How endogenous risk preferences and sample selection affect analysis of firm survival," Small Business Economics, Springer, vol. 56(4), pages 1309-1332, April.
    2. Dohmen, Thomas & Lehmann, Hartmut & Pignatti, Norberto, 2016. "Time-varying individual risk attitudes over the Great Recession: A comparison of Germany and Ukraine," Journal of Comparative Economics, Elsevier, vol. 44(1), pages 182-200.
    3. Nicolás Salamanca & Buly A. Cardak & Edwin Ip & Joe Vecci, 2023. "Time-stability of risk preferences: A new approach with evidence from developed and developing countries," Discussion Papers 2305, University of Exeter, Department of Economics.
    4. Hetschko, Clemens & Preuss, Malte, 2020. "Income in jeopardy: How losing employment affects the willingness to take risks," Journal of Economic Psychology, Elsevier, vol. 79(C).
    5. Haoran Wang & Shi Yu, 2021. "Robo-Advising: Enhancing Investment with Inverse Optimization and Deep Reinforcement Learning," Papers 2105.09264, arXiv.org.
    6. Campara, Jessica & Da Costa, Newton & Matsushita, Raul & Da Silva, Sergio, 2021. "Two selves and two minds in a longitudinal survey of risk attitudes," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    7. Harry Pickard & Thomas Dohmen & Bert Landeghem, 2024. "Inequality and risk preference," Journal of Risk and Uncertainty, Springer, vol. 69(2), pages 191-217, October.
    8. Tausch, Franziska & Zumbuehl, Maria, 2018. "Stability of risk attitudes and media coverage of economic news," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 295-310.
    9. Dohmen, Thomas & Khamis, Melanie & Lehmann, Hartmut & Pignatti, Norberto, 2023. "Risk Attitudes and Informal Employment in Ukraine," IZA Discussion Papers 16445, Institute of Labor Economics (IZA).
    10. Murray, Neil & Neyse, Levent & Schröder, Carsten, 2023. "Changes in risk attitudes vary across domains throughout the life course," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 534-563.
    11. James Banks & Elena Bassoli & Irene Mammi, 2019. "Changing Risk Preferences at Older Ages," Working Papers 2019:01, Department of Economics, University of Venice "Ca' Foscari".
    12. Agostino Capponi & Sveinn Olafsson & Thaleia Zariphopoulou, 2019. "Personalized Robo-Advising: Enhancing Investment through Client Interaction," Papers 1911.01391, arXiv.org, revised Nov 2020.
    13. Mesly, Olivier, 2023. "Irrational exuberance and deception — Why markets spin out of control," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    14. Banks, James & Bassoli, Elena & Mammi, Irene, 2020. "Changing attitudes to risk at older ages: The role of health and other life events," Journal of Economic Psychology, Elsevier, vol. 79(C).
    15. Andrea Caragliu & Chiara F. Del Bo & Karima Kourtit & Peter Nijkamp, 2016. "The winner takes it all: forward-looking cities and urban innovation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(3), pages 617-645, May.
    16. Dominique Pépin & Stephen Miller, 2020. "The Time-Varying Nature of Risk Aversion: Evidence from 60 Years of U.S. Stock Market Data," Post-Print hal-04648224, HAL.
    17. Humoud Alsabah & Agostino Capponi & Octavio Ruiz Lacedelli & Matt Stern, 2019. "Robo-advising: Learning Investors' Risk Preferences via Portfolio Choices," Papers 1911.02067, arXiv.org, revised Nov 2019.
    18. Dominique Pépin & Stephen Miller, 2020. "The Time-Varying Nature of Risk Aversion: Evidence from 60 Years of U.S. Stock Market Data," Post-Print hal-04648224, HAL.
    19. Alessia Sconti, 2020. "Financial Literacy in Italy: What works among millennials most?," Working Papers 01/2020, University of Verona, Department of Economics.
    20. Agostino Capponi & Sveinn Ólafsson & Thaleia Zariphopoulou, 2022. "Personalized Robo-Advising: Enhancing Investment Through Client Interaction," Management Science, INFORMS, vol. 68(4), pages 2485-2512, April.
    21. Alessandro Bucciol & Martina Manfre' & Marcella Veronesi, 2018. "The Role of Financial Literacy and Money Education on Wealth Decisions," Working Papers 05/2018, University of Verona, Department of Economics.

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