Risk Aversion and Clientele Effects

76 Pages Posted: 15 Sep 2009 Last revised: 26 May 2022

See all articles by Douglas W. Blackburn

Douglas W. Blackburn

JP Morgan Chase

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Andrey Ukhov

Cornell University

Multiple version iconThere are 2 versions of this paper

Date Written: September 2009


We use traded options on growth and value indices to test for clientele differences in risk preferences. Value investors appear to have exhibited a higher average level of risk aversion than growth investors for two different time periods in the late 1990's and early 2000's. We construct a model of time-varying clientele preferences that allows investors with different levels of risk-aversion to switch between investment styles conditional upon the evolution of returns and risk. The model makes predictions about the autocorrelations structure of measured risk parameters and also about the autocorrelation and cross-autocorrelation of fund flows by style. Empirical tests of the model provide evidence consistent with the existence of style switchers--investors who move funds between growth and value securities. We construct trading strategies in the value and growth index options markets that effectively buy risk from one clientele and sell it to another. These strategies generated modest positive returns over the period of study.

Suggested Citation

Blackburn, Douglas W. and Goetzmann, William N. and Ukhov, Andrey, Risk Aversion and Clientele Effects (September 2009). NBER Working Paper No. w15333, Available at SSRN: https://ssrn.com/abstract=1472271

Douglas W. Blackburn

JP Morgan Chase ( email )

New York, NY
United States

William N. Goetzmann (Contact Author)

Yale School of Management - International Center for Finance ( email )

165 Whitney Ave.
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-436-9252 (Fax)

HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrey Ukhov

Cornell University ( email )

Ithaca, NY 14853
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics