Changes in Financial Risk Tolerance, 1983-2001

Yao, R., Hanna, S. D. & Lindamood, S. (2004). Changes in financial risk tolerance, 1983-2001. Financial Services Review, 13(4), 249-266.

20 Pages Posted: 3 Mar 2016

See all articles by Rui Yao

Rui Yao

University of Missouri at Columbia - Department of Personal Finance Planning

Sherman D. Hanna

Ohio State University (OSU)

Suzanne Lindamood

Independent

Date Written: 2004

Abstract

Using six Survey of Consumer Finances cross-sectional datasets representing the years 1983-2001, this study investigates changes in financial risk tolerance levels over time. Logit analyses are performed to test changes in risk tolerance, controlling for respondent and household characteristics. Willingness to take some risk fell from 1983 to 1989, did not change from 1989 to 1992, increased in 1995, increased again in 1998, then decreased in 2001. Financial risk tolerance tends to increase when stock returns increase and decrease when stock returns decrease. This relationship could lead to buying when prices are high and selling when prices are low. Financial education is needed to help investors overcome the bias of overweighting recent events.

Keywords: individual investing, economic trends, risk tolerance, stock ownership, Survey of Consumer Finances

JEL Classification: D140; G110

Suggested Citation

Yao, Rui and Hanna, Sherman D. and Lindamood, Suzanne, Changes in Financial Risk Tolerance, 1983-2001 (2004). Yao, R., Hanna, S. D. & Lindamood, S. (2004). Changes in financial risk tolerance, 1983-2001. Financial Services Review, 13(4), 249-266. . Available at SSRN: https://ssrn.com/abstract=2740157

Rui Yao

University of Missouri at Columbia - Department of Personal Finance Planning ( email )

239 Stanley Hall
Columbia, MO 65211-7700
United States
573-882-9343 (Phone)
573-884-8389 (Fax)

HOME PAGE: http://pfp.missouri.edu/faculty_yao.html

Sherman D. Hanna (Contact Author)

Ohio State University (OSU) ( email )

1787 Neil Avenue
Campbell 265D
Columbus, OH 43210
United States
614-292-4584 (Phone)

Suzanne Lindamood

Independent ( email )

No Address Available

Register to save articles to
your library

Register

Paper statistics

Downloads
217
Abstract Views
826
rank
140,610
PlumX Metrics