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Financial Risk Aversion and Personal Life History

Author

Listed:
  • Alessandro Bucciol

    (Department of Economics (University of Verona))

  • Luca Zarri

    (Department of Economics (University of Verona))

Abstract

Though risk attitude is central to economics and finance, relatively little is known about how it is formed and how it changes over time. Based on US data from a dedicated psycho-social module on lifestyle of the 2010 Health and Retirement Study (HRS), we provide new evidence on the correlation between financial risk attitude and life-history negative events out of an individual’s control. Using observed portfolio decisions to proxy for risk aversion, we find correlation with two of such events: having been in a natural disaster and (especially) the loss of a child. These effects survive after controlling for classic socio-demographic determinants of risk aversion.

Suggested Citation

  • Alessandro Bucciol & Luca Zarri, 2013. "Financial Risk Aversion and Personal Life History," Working Papers 05/2013, University of Verona, Department of Economics.
    • Handle: RePEc:ver:wpaper:05/2013
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    References listed on IDEAS

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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How life events shape risk aversion
      by Economic Logician in Economic Logic on 2013-03-22 19:56:00
    2. Entrenching inequality
      by chris dillow in Stumbling and Mumbling on 2013-04-04 19:11:33
    3. Scarred by history
      by ? in Stumbling and Mumbling on 2016-01-27 19:32:00

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    More about this item

    Keywords

    Risk Aversion; Financial Asset Ownership; Personal Life History; Behavioral Finance;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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