Impact of Economic Conditions on Individual Risk Attitude
39 Pages Posted: 17 Jul 2015 Last revised: 21 Jul 2015
Date Written: July 15, 2015
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: Suggested Citation