Once Bitten, Twice Shy

Do Personal Experiences or Wealth Changes Affect Risk Taking?

Publikation: KonferencebidragPaperForskningpeer review

Resumé

We study how personal experiences affect individual risk taking. To separate the intertwining effects of personal experiences and wealth changes, our identification strategy relies on the decision to keep unexpected inheritances of risky assets. Experience derives from investments in banks that defaulted in the aftermath of the financial crisis. To differentiate the effect of personal experiences, we classify the degrees of experiences into first-hand experiences from personal losses, second-hand experiences from the losses of close family members, and third-hand experiences from living in municipalities where banks defaulted. We find that third-hand experiences result in marginally lower risk taking. Second-hand experiences have a relatively stronger negative effect, whereas the effect of first-hand experiences on risk taking is strongly negative. Overall, our results demonstrate that personal experiences aside from changes in wealth explain substantial heterogeneity in individuals’ risk taking.
OriginalsprogEngelsk
Publikationsdato2016
Antal sider49
StatusUdgivet - 2016
BegivenhedThe 43rd European Finance Association Annual Meeting (EFA 2016) - BI Norwegian Business School, Oslo, Norge
Varighed: 17 aug. 201620 aug. 2016
Konferencens nummer: 43
http://www.efa2016.org/

Konference

KonferenceThe 43rd European Finance Association Annual Meeting (EFA 2016)
Nummer43
LokationBI Norwegian Business School
LandNorge
ByOslo
Periode17/08/201620/08/2016
Internetadresse

Emneord

  • Experiences
  • Inertia
  • Risk taking
  • Financial crisis
  • Household finance

Citer dette

Andersen, S., Hanspal, T., & Meisner Nielsen, K. (2016). Once Bitten, Twice Shy: Do Personal Experiences or Wealth Changes Affect Risk Taking?. Afhandling præsenteret på The 43rd European Finance Association Annual Meeting (EFA 2016), Oslo, Norge.
Andersen, Steffen ; Hanspal, Tobin ; Meisner Nielsen, Kasper. / Once Bitten, Twice Shy : Do Personal Experiences or Wealth Changes Affect Risk Taking?. Afhandling præsenteret på The 43rd European Finance Association Annual Meeting (EFA 2016), Oslo, Norge.49 s.
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abstract = "We study how personal experiences affect individual risk taking. To separate the intertwining effects of personal experiences and wealth changes, our identification strategy relies on the decision to keep unexpected inheritances of risky assets. Experience derives from investments in banks that defaulted in the aftermath of the financial crisis. To differentiate the effect of personal experiences, we classify the degrees of experiences into first-hand experiences from personal losses, second-hand experiences from the losses of close family members, and third-hand experiences from living in municipalities where banks defaulted. We find that third-hand experiences result in marginally lower risk taking. Second-hand experiences have a relatively stronger negative effect, whereas the effect of first-hand experiences on risk taking is strongly negative. Overall, our results demonstrate that personal experiences aside from changes in wealth explain substantial heterogeneity in individuals’ risk taking.",
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Andersen, S, Hanspal, T & Meisner Nielsen, K 2016, 'Once Bitten, Twice Shy: Do Personal Experiences or Wealth Changes Affect Risk Taking?' Paper fremlagt ved The 43rd European Finance Association Annual Meeting (EFA 2016), Oslo, Norge, 17/08/2016 - 20/08/2016, .

Once Bitten, Twice Shy : Do Personal Experiences or Wealth Changes Affect Risk Taking? / Andersen, Steffen; Hanspal, Tobin; Meisner Nielsen, Kasper.

2016. Afhandling præsenteret på The 43rd European Finance Association Annual Meeting (EFA 2016), Oslo, Norge.

Publikation: KonferencebidragPaperForskningpeer review

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N2 - We study how personal experiences affect individual risk taking. To separate the intertwining effects of personal experiences and wealth changes, our identification strategy relies on the decision to keep unexpected inheritances of risky assets. Experience derives from investments in banks that defaulted in the aftermath of the financial crisis. To differentiate the effect of personal experiences, we classify the degrees of experiences into first-hand experiences from personal losses, second-hand experiences from the losses of close family members, and third-hand experiences from living in municipalities where banks defaulted. We find that third-hand experiences result in marginally lower risk taking. Second-hand experiences have a relatively stronger negative effect, whereas the effect of first-hand experiences on risk taking is strongly negative. Overall, our results demonstrate that personal experiences aside from changes in wealth explain substantial heterogeneity in individuals’ risk taking.

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KW - Inertia

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KW - Household finance

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Andersen S, Hanspal T, Meisner Nielsen K. Once Bitten, Twice Shy: Do Personal Experiences or Wealth Changes Affect Risk Taking?. 2016. Afhandling præsenteret på The 43rd European Finance Association Annual Meeting (EFA 2016), Oslo, Norge.