Retirement investor risk tolerance in tranquil and crisis periods: experimental survey evidence
Date
2011
Authors
Bateman, H.
Islam, T.
Louviere, J.
Satchell, S.
Thorp, S.
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Journal article
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Journal of Behavioral Finance, 2011; 12(4):201-218
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Abstract
We conduct a choice experiment to investigate the impact of the financial crisis of 2008 on retirement saver investment choice and risk aversion. Analysis of estimated individual risk parameters shows a small increase in mean risk aversion between the relatively tranquil period of early 2007 and the crisis conditions of late 2008. Investment preferences of survey respondents, estimated using the scale-adjusted version of a latent class choice model, also change during the crisis. We identify age and income as important determinants of preference classes in both surveys and age is also identified as a key determinant of variability (scale). Young and low income individuals make choices that are more consistent with standard mean-variance analysis, but older and higher income individuals react positively to both higher returns and increasing risk in returns. Overall we find a mild moderating of retirement investor risk tolerance in 2008.
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Link to a related website: https://opus.lib.uts.edu.au/bitstream/10453/17253/1/2009003599.pdf, Open Access via Unpaywall
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Copyright [2011] The Institute of Behavioral Finance