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An Evaluation of the Effect of the COVID-19 Pandemic on the Risk Tolerance of Financial Decision Makers

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  • Heo, Wookjae
  • Rabbani, Abed
  • Grable, John E.

Abstract

This paper documents the negative effect of the COVID-19 pandemic on financial risk attitudes across a broad sample of financial decision makers (N = 18,913). Findings show that the risk tolerance of financial decision makers can be altered when an extreme economic, social, or environmental shock occurs. A general shift away from be willing to take financial risk was noted after the COVID-19 pandemic emergency declaration. The COVID-19 pandemic shifted risk preference downward for the majority of financial decision makers in this study.

Suggested Citation

  • Heo, Wookjae & Rabbani, Abed & Grable, John E., 2021. "An Evaluation of the Effect of the COVID-19 Pandemic on the Risk Tolerance of Financial Decision Makers," Finance Research Letters, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:finlet:v:41:y:2021:i:c:s1544612320316561
    DOI: 10.1016/j.frl.2020.101842
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    References listed on IDEAS

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    Cited by:

    1. Cheng, Chunli, 2022. "Beyond death: The impact of a population-wide health shock on life insurance," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    2. Hayet Soltani & Mouna Boujelbène Abbes, 2023. "The Predictive Power of Financial Stress on the Financial Markets Dynamics: Hidden Markov Model," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(1), pages 94-115, March.
    3. Sha, Yezhou & Zhang, Yong & Lu, Xiaomeng, 2022. "Household investment diversification amid Covid-19 pandemic: Evidence from Chinese investors," Finance Research Letters, Elsevier, vol. 47(PA).
    4. Hao Dong & Yingrong Zheng & Na Li, 2023. "Analysis of Systemic Risk Scenarios and Stabilization Effect of Monetary Policy under the COVID-19 Shock and Pharmaceutical Economic Recession," Sustainability, MDPI, vol. 15(1), pages 1-32, January.
    5. Xu, Xin & Xu, Xiaoguang, 2023. "Monetary policy transmission modeling and policy responses," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    6. Iyer, Subramanian Rama & Simkins, Betty J., 2022. "COVID-19 and the Economy: Summary of research and future directions," Finance Research Letters, Elsevier, vol. 47(PB).
    7. Alexandros P. Bechlioulis & Dimitrios Karamanis, 2023. "Consumers’ changing financial behavior during the COVID-19 lockdown: the case of Internet banking use in Greece," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 28(3), pages 526-543, September.

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    Keywords

    Financial Risk Tolerance; COVID-19;

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