42 Pages Posted: 2 Dec 2010 Last revised: 13 Jan 2015
Date Written: August 8, 2012
Combining monthly survey data with matching trading records, we examine how individual investor perceptions change and drive trading and risk-taking behavior during the 2008-2009 financial crisis. We find that investor perceptions fluctuate significantly during the crisis, with risk tolerance and risk perceptions being less volatile than return expectations. During the worst months of the crisis, investors’ return expectations and risk tolerance decrease, while their risk perceptions increase. Towards the end of the crisis, investor perceptions recover. We document substantial swings in trading and risk-taking behavior that are driven by changes in investor perceptions. Overall, individual investors continued to trade actively and did not de-risk their investment portfolios during the crisis.
Keywords: Investor Perceptions, Investor Behavior, Investor Performance, Financial Crisis
JEL Classification: D14, D81, G01, G11, G24
Suggested Citation: Suggested Citation
Hoffmann, Arvid O. I. and Post, Thomas and Pennings, Joost M. E., Individual Investor Perceptions and Behavior During the Financial Crisis (August 8, 2012). Journal of Banking and Finance, 37(1), pp. 60-74. Available at SSRN: https://ssrn.com/abstract=1717984 or http://dx.doi.org/10.2139/ssrn.1717984