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Household risk taking after the financial crisis

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  • Necker, Sarah
  • Ziegelmeyer, Michael

Abstract

This study investigates whether and how the crisis in 2008/2009 affects households’ risk attitudes, subjective risk and return expectations, and planned financial risk taking using the German SAVE study. Households’ wealth change from end-2007 to end-2009 is not found to have an effect. However, households that attribute losses to the crisis decreased their risk tolerance and planned risk taking; the probability of expecting an increase in risks and returns is increased. According to economic theory, wealth changes attributed to a dramatic event should not have a different effect than other wealth changes. The results suggest an emotional reaction.

Suggested Citation

  • Necker, Sarah & Ziegelmeyer, Michael, 2016. "Household risk taking after the financial crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 141-160.
    • Handle: RePEc:eee:quaeco:v:59:y:2016:i:c:p:141-160
    DOI: 10.1016/j.qref.2015.03.006
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    More about this item

    Keywords

    Financial crisis; Risk preferences; Stock market expectations; Wealth fluctuations; Emotions;
    All these keywords.

    JEL classification:

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

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