Time Varying Risk Aversion

Luigi Guiso, Paola Sapienza and Luigi Zingales

No 19284, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use a repeated survey of an Italian bank's clients to test whether investors' risk aversion increases following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increases substantially after the crisis. After considering standard explanations, we investigate whether this increase might be an emotional response (fear) triggered by a scary experience. To show the plausibility of this conjecture, we conduct a lab experiment. We find that subjects who watched a horror movie have a certainty equivalent that is 27% lower than the ones who did not, supporting the fear-based explanation. Finally, we test the fear-based model with actual trading behavior and find consistent evidence.

JEL-codes: D1 D8 G11 G12 (search for similar items in EconPapers)
Date: 2013-08
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (107)

Published as Time Varying Risk Aversion. Luigi Guisoa, Paola Sapienzab, Luigi Zingales. Journal of Financial Economics Available online 19 March 2018 In Press
Published as Luigi Guiso & Paola Sapienza & Luigi Zingales, 2018. "Time Varying Risk Aversion," Journal of Financial Economics, .

Downloads: (external link)
http://www.nber.org/papers/w19284.pdf (application/pdf)

Related works:
Journal Article: Time varying risk aversion (2018)
Working Paper: Time Varying Risk Aversion (2013)
Working Paper: Time Varying Risk Aversion (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:19284

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w19284

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().