Risky Assets in Europe and the US: Risk Vulnerability, Risk Aversion and Economic Environment

38 Pages Posted: 24 Apr 2019

See all articles by Karim Bekhtiar

Karim Bekhtiar

Vienna University of Economics and Business

Pirmin Fessler

Oesterreichische Nationalbank (OeNB)

Peter Lindner

Oesterreichische Nationalbank (OeNB)

Date Written: April 18, 2019

Abstract

We use cross-country microdata to analyse the risk taking of households in Europe and the US. Concerning the extensive as well as the intensive margin of risky assets, European households differ substantially from US households; but also inside Europe we document substantial differences. Furthermore, average risk aversion is strongly correlated with the share of households holding risky assets across countries. We decompose the observed differences into two parts. A part explainable by household characteristics as well as differences in risk aversion and a remainder. We employ the unexplained part resulting from our microeconometric decomposition analysis together with country-level variables on the economic environment to relate observed differences in risky asset holdings to institutional ones. We find that institutional differences such as shareholder protection are strongly correlated with the unexplainable differences with regard to holdings of risky assets.

Keywords: household finance, portfolio choice, background risk, HFCS, SCF

JEL Classification: D12, D14, D31, G11

Suggested Citation

Bekhtiar, Karim and Fessler, Pirmin and Lindner, Peter, Risky Assets in Europe and the US: Risk Vulnerability, Risk Aversion and Economic Environment (April 18, 2019). ECB Working Paper No. 2270 (2019); ISBN 978-92-899-3532-6 . Available at SSRN: https://ssrn.com/abstract=3376417

Karim Bekhtiar (Contact Author)

Vienna University of Economics and Business

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Pirmin Fessler

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Peter Lindner

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

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