Impact of Economic Conditions on Individual Risk Attitude

39 Pages Posted: 17 Jul 2015 Last revised: 21 Jul 2015

See all articles by Mark J. Browne

Mark J. Browne

St. John's University - Peter J. Tobin College of Business

Verena Jaeger

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management)

Petra Steinorth

University of Hamburg - Institute for Risk Management and Insurance

Date Written: July 15, 2015

Abstract

The current study uses the German Socio Economic Panel to examine how the financial crisis of 2008-2010 impacted individuals’ risk attitude. We find substantial changes in risk attitudes associated with the financial crisis which supports countercyclical risk aversion. We find that managers who continued to work in a leadership position were more risk taking in the beginning and reacted quicker compared both to the general population and to individuals who entered the crisis but did not exit the crisis with managerial positions. Changes in risk tolerance levels differ across socio-demographic groups, including gender and income levels. Finally, we observe variations across generations, which we attribute to generation-specific macro-economic experiences.

Keywords: Variable risk attitudes, risk aversion, economic conditions, 2008 financial crisis, countercyclical risk aversion

JEL Classification: D81, G01, J11, J13, J14

Suggested Citation

Browne, Mark J. and Jaeger, Verena and Steinorth, Petra, Impact of Economic Conditions on Individual Risk Attitude (July 15, 2015). Available at SSRN: https://ssrn.com/abstract=2631066

Mark J. Browne

St. John's University - Peter J. Tobin College of Business ( email )

New York, NY
United States

Verena Jaeger (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

Petra Steinorth

University of Hamburg - Institute for Risk Management and Insurance ( email )

Moorweidenstr. 18
Hamburg, 20148

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