Download this Paper Open PDF in Browser

Who Exhibits Time Varying Risk Aversion?

46 Pages Posted: 27 Apr 2016 Last revised: 29 Apr 2016

David Blanchett

Morningstar Investment Management

Michael S. Finke

The American College

Michael A. Guillemette

Texas Tech University - Department of Personal Financial Planning

Date Written: April 26, 2016


There is growing empirical evidence that risk preferences change based on financial market conditions. This paper explores individual predictors of time varying risk aversion among participants in U.S. defined contribution plans using a unique dataset with daily responses to a risk tolerance questionnaire. We find that older investors (ages 51-65) are more susceptible to time varying risk aversion. Among older investors, variable risk preference was greatest for participants with the smallest account balances and the lowest incomes, but was unrelated to equity allocation within their retirement portfolio. Much of the variation in the aggregate risk tolerance score can be attributed to variation in future long-term equity performance expectations among older investors. We discuss how target-date funds have the potential to reduce losses from poor market timing that may result from time varying risk aversion.

Keywords: Risk Aversion, Time Varying Risk Aversion, Advanced Age, Account Balance, Income, Morningstar

JEL Classification: D81

Suggested Citation

Blanchett, David and Finke, Michael S. and Guillemette, Michael A., Who Exhibits Time Varying Risk Aversion? (April 26, 2016). Available at SSRN:

David Blanchett (Contact Author)

Morningstar Investment Management ( email )

22 W Washington
Chicago, IL 60602
United States
859-492-5637 (Phone)


Michael Finke

The American College ( email )

Bryn Mawr, PA 19010
United States

Michael Guillemette

Texas Tech University - Department of Personal Financial Planning ( email )

1301 Akron Ave, HS-260
Box 41210
Lubbock, TX 79409-1210
United States

Paper statistics

Abstract Views