Risk Attitudes do not explain Cash Holdings

Nicole Hentschel ()
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Nicole Hentschel: University of St.Gallen and Swiss National Bank

No 25.04, Working Papers from Swiss National Bank, Study Center Gerzensee

Abstract: Despite the long-termtrend away from cash and the widespread adoption and acceptance of payment cards, many people still carry considerable amounts of cash. In a preregistered study, I examine whether risk attitudes can explain consumers’ persistent cash holdings. To self-insure against the possibility of being unable to pay by card, risk-averse consumers are expected to hold cash in larger amounts. Moreover, consumers who overweight the small probability of card non-acceptance and those who prefer early resolution of uncertainty are also predicted to carry more cash. I test these predictions using data from the RAND American Life Panel (N = 989) and on experimental preference data from Swiss consumers (N = 1’666). 86% of U.S. and 95% of Swiss individuals carry cash in their wallets, with an average of USD 64 and CHF 94, respectively. Neither risk aversion, probability weighting, nor a preference for early resolution of uncertainty are consistently related to cash holdings.

Pages: 109 pages
Date: 2025-09
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