Household Risk Taking after the Financial Crisis
40 Pages Posted: 17 Dec 2014
Date Written: March 11, 2013
This study investigates whether and how the crisis in 2008/2009 affects households' risk attitudes, subjective risk and return expectations, and planned financial risk taking using the German SAVE study. Households' wealth change from end-2007 to end-2009 is not found to have an effect. However, households that attribute losses to the crisis decreased their risk tolerance and planned risk taking; the probability of expecting an increase in risks and returns is raised. According to economic theory, wealth changes attributed to a dramatic event should not have a different effect than other wealth changes. The results suggest an emotional reaction.
Keywords: Financial and economic crisis, risk preferences, stock market expectations, wealth fluctuations, emotions
JEL Classification: D81, D14, G11
Suggested Citation: Suggested Citation