Financial Risk-Taking under Health Risk

Björn Bos, Moritz Drupp, Jasper N. Meya and Martin Quaas

No 10387, CESifo Working Paper Series from CESifo

Abstract: We study how background health risk affects financial risk-taking. We elicit financial risk-taking behavior of a representative sample of more than 5,000 Germans in five panel waves during the COVID-19 pandemic. Exploiting variation in local infections across time and space, we find that an increase in infections affecting background health risk translates into higher levels of self-reported fear and decreases financial investments in a risky asset. Once vaccines become available as a self-insurance device, the tempering effect on investments ceases. Our results provide evidence that non-financial background risks affect financial risk-taking, and for the alleviating effect of self-insurance devices.

JEL-codes: D14 D91 G11 G41 G51 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cbe, nep-fmk, nep-hea and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10387

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