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Household willingness to take financial risk: Stockmarket movements and life‐cycle effects

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  • Cardak, Buly A.
  • Martin, Vance L.

Abstract

Using panel data on Australian households, the relationship between risk tolerance and past stock returns is investigated across economic and financial cycles, as well as over the life-cycle and across generations. Risk tolerance is found to be procyclical with stock returns over an eight year horizon. The empirical results also reveal an inverted J-curve age risk profile, and the presence of a longer cycle across generations. Results are robust to controlling for financial crises, return volatility, real estate returns and home bias.

Suggested Citation

  • Cardak, Buly A. & Martin, Vance L., 2023. "Household willingness to take financial risk: Stockmarket movements and life‐cycle effects," Journal of Banking & Finance, Elsevier, vol. 149(C).
    • Handle: RePEc:eee:jbfina:v:149:y:2023:i:c:s0378426622003326
    DOI: 10.1016/j.jbankfin.2022.106752
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    More about this item

    Keywords

    Risk tolerance; Stockmarket movements; Life-cycle effects; Home bias;
    All these keywords.

    JEL classification:

    • G50 - Financial Economics - - Household Finance - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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