Individual Investor Perceptions and Behavior During the Financial Crisis

42 Pages Posted: 2 Dec 2010 Last revised: 13 Jan 2015

Arvid O. I. Hoffmann

University of Adelaide - Business School; Network for Studies on Pensions, Aging and Retirement (Netspar)

Thomas Post

Maastricht University - School of Business and Economics - Department of Finance; Netspar

Joost M. E. Pennings

Maastricht University

Date Written: August 8, 2012

Abstract

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

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

Arvid O. I. Hoffmann (Contact Author)

University of Adelaide - Business School ( email )

10 Pulteney Street
Adelaide, South Australia 5005
Australia

Network for Studies on Pensions, Aging and Retirement (Netspar)

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Thomas Post

Maastricht University - School of Business and Economics - Department of Finance ( email )

Tongersestraat 53
Maastricht, 6200 MD
Netherlands
+31 43 38 83899 (Phone)
+31 43 38 84875 (Fax)

HOME PAGE: http://www.thomas-post.com

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.netspar.nl

Joost M. E. Pennings

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Paper statistics

Downloads
821
Rank
22,930
Abstract Views
3,215