Stability of Risk Attitudes and Media Coverage of Economic News

41 Pages Posted: 14 Mar 2016

See all articles by Franziska Tausch

Franziska Tausch

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Maria Zumbuehl

University of Bern

Date Written: February 2016

Abstract

This paper investigates the impact of exogenous changes in individuals' perceived economic environment on their self-stated risk attitudes by exploiting changes in media coverage of economic news. We use information on risk attitudes from the German Socioeconomic Panel and combine it with data on the average daily frequency of economic news reports during the year and the month preceding the date of the risk attitude elicitation. Using fixed effects regressions we observe effects of both long and short term changes in the media. We find that an increase in economic news in the previous year, irrespective of whether the news are bad or good, is negatively related to individuals' willingness to take risks. An increase in news that are aggregated over the previous month, however, relates to a decrease in risk aversion if the news are predominantly good. The strength of the relations depends on individuals' personal characteristics and personality traits. A positive correlation between bad news coverage and individuals' worries suggests that changes in risk perception may mediate the relation between news coverage and risk attitudes.

Keywords: media coverage, economic news, stability of risk attitudes, risk perception

JEL Classification: D80, D03

Suggested Citation

Tausch, Franziska and Zumbuehl, Maria, Stability of Risk Attitudes and Media Coverage of Economic News (February 2016). MPI Collective Goods Preprint, No. 2016/2. Available at SSRN: https://ssrn.com/abstract=2747290 or http://dx.doi.org/10.2139/ssrn.2747290

Franziska Tausch (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Maria Zumbuehl

University of Bern ( email )

Schanzeneckstrasse 1
Bern, BERN 3001
Switzerland

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