Financial Risk Aversion and Household Asset Diversification

Nataliya Barasinska, Dorothea Schäfer and Andreas Stephan

No 6.1A, Working Paper / FINESS from DIW Berlin, German Institute for Economic Research

Abstract: This paper explores the relationship between self-declared risk aversion of private investors and their willingness to hold diversified portfolios of financial assets. The analysis is based on household survey data from the German Socioeconomic Panel (SOEP) that provides a reliable measure of individual attitude towards financial risk. Our empirical findings suggest that more risk averse investors tend to hold incomplete portfolios that consist mainly of a few safe assets. We also find that for private households the propensity to diversify is highly dependent on whether liquidity and safety needs are satisfied.

Keywords: household finances; asset portfolio; diversification; risk aversion (search for similar items in EconPapers)
JEL-codes: D14 G11 (search for similar items in EconPapers)
Pages: 27 p.
Date: 2009
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Financial Risk Aversion and Household Asset Diversification (2008)
Working Paper: Financial Risk Aversion and Household Asset Diversification (2008)
Working Paper: Financial Risk Aversion and Household Asset Diversification (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwfin:diwfin6.1a

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