Countercyclical Risk Aversion: Evidence from 10 Million Auto Insurance Transactions in China

58 Pages Posted: 10 Apr 2020

See all articles by Huafeng (Jason) Chen

Huafeng (Jason) Chen

Fudan University - Fanhai International School of Finance (FISF)

Yinglu Deng

Tsinghua University - School of Economics & Management

Pengfei Li

Tsinghua University - PBC School of Finance

Hao Zhou

SUSTech Business School; Tsinghua University - PBC School of Finance

Date Written: March 17, 2020

Abstract

A fundamental idea in modern asset pricing is that risk aversion may be time varying and countercyclical (Campbell and Cochrane 1999). Existing evidence is scant and based mostly on experimental or survey data. We aim to test this key assumption using a large panel of real-world transaction data. Risk aversion is imputed from Chinese auto insurance policies, including 10 million transactions from 2011 to 2017 and representing the entire population of 200 million auto insurance policies in China. We find that individuals' risk aversion is indeed time varying and countercyclical.

Keywords: Risk Aversion, Countercyclical, Auto Insurance

JEL Classification: G12

Suggested Citation

Chen, Huafeng (Jason) and Deng, Yinglu and Li, Pengfei and Zhou, Hao, Countercyclical Risk Aversion: Evidence from 10 Million Auto Insurance Transactions in China (March 17, 2020). Available at SSRN: https://ssrn.com/abstract=3555699 or http://dx.doi.org/10.2139/ssrn.3555699

Huafeng (Jason) Chen

Fudan University - Fanhai International School of Finance (FISF) ( email )

220 Handan Road
Shanghai, 200433
China

Yinglu Deng

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Pengfei Li (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Hao Zhou

SUSTech Business School ( email )

1088 Xueyuan Avenue, Nanshan District
Southern University of Science and Technology
Shenzhen, Guangdong
China
+86-0755-88010464 (Phone)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing, 100083
China
+86-10-62790655 (Phone)

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