Macroeconomic Conditions and Australian Financial Risk Attitudes, 2001-2010

Journal of Family and Economic Issues, 2013

15 Pages Posted: 22 Jun 2013

Date Written: June 2013

Abstract

This paper employed panel data from the 2001-2010 waves of the Household, Income, and Labor Dynamics in Australia (HILDA) survey to investigate the financial risk attitudes of 10,000 individuals across 6,839 households. Ordered logit models including individual and household random effects tested for changes in risk tolerance while focusing on the impact of transitory macroeconomic conditions and controlling for individual demographic and socioeconomic characteristics. We found Australians generally reduced their tolerance for risk over time, though higher levels of education, wealth, good health, and being self-employed indicated the increased likelihood of risk tolerance. We also found macroeconomic conditions were jointly significant in determining financial risk attitudes. However, the innate demographic and socioeconomic characteristics of individuals were more important at the margin.

Keywords: Risk attitudes, Risk aversion, Household, Income and Labor Dynamics in Australia (HILDA) survey, Ordered logit

Suggested Citation

West, Tracey and Worthington, Andrew C., Macroeconomic Conditions and Australian Financial Risk Attitudes, 2001-2010 (June 2013). Journal of Family and Economic Issues, 2013, Available at SSRN: https://ssrn.com/abstract=2283018

Tracey West (Contact Author)

Griffith University ( email )

170 Kessels Road
Nathan, Queensland QLD 4111
Australia

Andrew C. Worthington

Griffith University ( email )

170 Kessels Road
Nathan, Queensland 4111
Australia
+61 (0)7 3735 4273 (Phone)
+61 (0)7 3735 3719 (Fax)

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