Once in a Lifetime? The Effects of the Global Financial Crisis on Household Willingness to Take Financial Risk

20 Pages Posted: 17 May 2020

See all articles by Buly A. Cardak

Buly A. Cardak

La Trobe University - School of Economics

Vance L. Martin

affiliation not provided to SSRN

Date Written: December 2019

Abstract

We investigate the effect of the global financial crisis (GFC) on household willingness to take risk. A model incorporating experienced returns as a determinant of risk tolerance is specified, with time‐varying weights on past stock returns capturing changes during the crisis. Results show that households became more myopic during the GFC, placing greater weight on more recent stock returns when evaluating financial risk attitudes. Households have been more sensitive to financial shocks during the GFC and post‐GFC periods, with the change in sensitivity found to be uniform over the life cycle and other household characteristics, but differing by income.

Suggested Citation

Cardak, Buly and Martin, Vance L., Once in a Lifetime? The Effects of the Global Financial Crisis on Household Willingness to Take Financial Risk (December 2019). Economic Record, Vol. 95, Issue 311, pp. 442-461, 2019, Available at SSRN: https://ssrn.com/abstract=3597605 or http://dx.doi.org/10.1111/1475-4932.12506

Buly Cardak (Contact Author)

La Trobe University - School of Economics ( email )

Bundoora
Bundoora, Victoria 3083 3086
Australia
+61 3 9479 3419 (Phone)
+61 3 9479 1654 (Fax)

Vance L. Martin

affiliation not provided to SSRN

No Address Available

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
3
Abstract Views
132
PlumX Metrics