Macroeconomic Conditions and Australian Financial Risk Attitudes, 2001–2010

Tracey West and Andrew Worthington

Journal of Family and Economic Issues, 2014, vol. 35, issue 2, 263-277

Abstract: This paper employed panel data from the 2001–2010 waves of the Household, Income, and Labor Dynamics in Australia (HILDA) survey to investigate the financial risk attitudes of 10,000 individuals across 6,839 households. Ordered logit models including individual and household random effects tested for changes in risk tolerance while focusing on the impact of transitory macroeconomic conditions and controlling for individual demographic and socioeconomic characteristics. We found Australians generally reduced their tolerance for risk over time, though higher levels of education, wealth, good health, and being self-employed indicated the increased likelihood of risk tolerance. We also found macroeconomic conditions were jointly significant in determining financial risk attitudes. However, the innate demographic and socioeconomic characteristics of individuals were more important at the margin. Copyright Springer Science+Business Media New York 2014

Keywords: Risk attitudes; Risk aversion; Household; Income and Labor Dynamics in Australia (HILDA) survey; Ordered logit (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (11)

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DOI: 10.1007/s10834-013-9362-3

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