Who Takes Risks When and Why: Determinants of Changes in Investor Risk Taking

58 Pages Posted: 1 Aug 2009 Last revised: 24 May 2013

Martin Weber

University of Mannheim - Department of Banking and Finance

Elke U. Weber

Columbia Business School - Management & Psychology

Alen Nosic

affiliation not provided to SSRN

Date Written: May 13, 2012

Abstract

Between September08 and June09, a period with significant market events, we surveyed UK online-brokerage customers at three-months intervals for their willingness to take risk, three-months expectations of returns and risks for the market and their own portfolio, and self-reported risk attitude. This unique dataset allowed us to analyze how these variables changed over time, and whether changes in risk taking were related to changes in expectations and/or risk attitudes. Risk taking changed substantially during the period, as did return and risk expectations. Numeric assessments of return and risk expectations were only weakly correlated with corresponding subjective judgments. Consistent with the risk-as-feelings hypothesis, changes in risk taking were associated with changes in subjective expectations of market portfolio risk and returns, but less with changes in numeric expectations.

Keywords: Risk Taking, Risk Return Model, Risk Attitude, Risk Expectation, Return Expectation

JEL Classification: G02, G11, G21

Suggested Citation

Weber, Martin and Weber, Elke U. and Nosic, Alen, Who Takes Risks When and Why: Determinants of Changes in Investor Risk Taking (May 13, 2012). Review of Finance, 17, 847-883; Columbia Business School Research Paper No. 12/29. Available at SSRN: https://ssrn.com/abstract=1441273 or http://dx.doi.org/10.2139/ssrn.1441273

Martin Weber

University of Mannheim - Department of Banking and Finance ( email )

D-68131 Mannheim
Germany
+49 621 181 1532 (Phone)
+49 621 181 1534 (Fax)

Elke U. Weber

Columbia Business School - Management & Psychology ( email )

3022 Broadway
New York, NY 10027
United States

Alen Nosic (Contact Author)

affiliation not provided to SSRN ( email )

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