Risk Taking, Preferences, and Beliefs: Evidence from Wuhan

62 Pages Posted: 24 Mar 2020 Last revised: 22 Jan 2021

See all articles by Di Bu

Di Bu

Macquarie University, Department of Applied Finance

Tobin Hanspal

WU Vienna University of Economics and Business

Yin Liao

Australian National University - The Centre for Applied Macroeconomic Analysis (CAMA); Macquarie University - Department of Applied Finance and Actuarial Studies

Yong Liu

Wuhan University of Science and Technology

Date Written: December 2020

Abstract

We study risk taking in a panel of subjects in Wuhan, China - before, during the COVID-19 crisis, and after the country reopened. Subjects in our sample traveled for semester break in January, generating variation in exposure to the virus and quarantine in Wuhan. Higher exposure leads subjects to reduce planned risk taking, risky investments, and optimism. Our findings help unify existing studies by showing that aggregate shocks affect general preferences for risk and economic expectations, while heterogeneity in experience further affect risk taking through beliefs about individuals’ own outcomes such as luck and sense of control.

Keywords: COVID-19, Economic preferences, Risk taking, Formative experiences, China

JEL Classification: G50, G51, G11, D14, G41

Suggested Citation

Bu, Di and Hanspal, Tobin and Liao, Yin and Liao, Yin and Liu, Yong, Risk Taking, Preferences, and Beliefs: Evidence from Wuhan (December 2020). SAFE Working Paper No. 301, Available at SSRN: https://ssrn.com/abstract=3559870 or http://dx.doi.org/10.2139/ssrn.3559870

Di Bu

Macquarie University, Department of Applied Finance ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Tobin Hanspal (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1 1
Wien, 1020
Austria

Yin Liao

Australian National University - The Centre for Applied Macroeconomic Analysis (CAMA) ( email )

Canberra, Australian Capital Territory 2601
Australia

Macquarie University - Department of Applied Finance and Actuarial Studies ( email )

Eastern Rd.
North Ryde
Sydney, NSW 2109
United States

Yong Liu

Wuhan University of Science and Technology ( email )

947 Heping Avenue,Qingshan District
null
Wuhan, Hubei 430081
China

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