The impact of economic conditions on individual and managerial risk taking

Mark Browne, Verena Jaeger and Petra Steinorth

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: The current study examines how the financial crisis of 2008-2009 impacted individuals' willingness to take risks (WTR). We find substantial changes in the WTR associated with the financial crisis which supports countercyclical risk aversion while controlling for wealth effects and risk perception. Yet, we also observe a quick recovery of the WTR immediately after the crisis. We find that managers are less risk averse in general, but participated less in the pre-crisis upswing in the WTR. Post-crisis, the managerial WTR took a deeper hit compared to the overall population. Changes in risk tolerance levels also differ across income levels, which we attribute to greater exposure to the stock market depreciation during the crisis.

Date: 2019
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Published in Geneva Risk and Insurance Review 1 44(2019): pp. 27-53

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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:78208

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