The Effect of Advanced Age and Equity Values on Risk Preferences

David Blanchett, Michael Finke and Michael Guillemette

Journal of Behavioral Finance, 2018, vol. 19, issue 4, 434-441

Abstract: The authors analyze the effect equity values and age have on the risk aversion of participants in U.S.-defined contribution plans using a unique dataset with daily responses to a risk tolerance questionnaire. They find that older investors are more risk averse compared with younger cohorts when controlling for the level of the S&P 500 Index, account balance, income, savings percentage, equity percentage and allocation fund percentage. They also find that risk preferences are influenced by the level of the S&P 500, but only in advanced age. This finding is consistent with decreasing absolute risk aversion when wealth is proxied by the S&P 500 Index.

Date: 2018
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DOI: 10.1080/15427560.2018.1431884

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