How vulnerable is risk aversion to wealth, health and other risks? An empirical analysis for Europe
Guillem Montoliu-Montes and
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Christophe Courbage: Geneva School of Business Administration
Guillem Montoliu-Montes: UNIL - Université de Lausanne
Béatrice Rey: GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique
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This paper empirically assesses how financial risk aversion reacts to a change in individuals' wealth and health and to the presence of both financial and health risks using the Survey of Health, Ageing, and Retirement in Europe (SHARE). Individuals in our sample exhibit financial risk aversion decreasing both in wealth and health. Financial risk aversion is also found to increase in the presence of a background financial risk and a background health risk. Interestingly, risk aversion is shown to be convex in wealth but linear in health. Such findings complement the literature on risk aversion behaviours and can help to better understand various economic decisions in a risky environment.
Keywords: risk aversion; (cross-) DARA; (cross-) risk vulnerability; background risk; health risk (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-eur and nep-rmg
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