Once Bitten, Twice Shy: The Power of Personal Experiences in Risk Taking

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Abstract

We study whether personal experiences are so powerful that they make individuals actively shy away from risk. Our research design relies on portfolio decisions relating to inheritances, which alter the active decision from one of choosing to take risk to one of choosing to reduce risk. Experience derives from investments in banks that defaulted following the 2007–2009 financial crisis. We classify experiences into first-hand experiences, resulting from personal losses; second-hand experiences, from losses of family members; and third-hand experiences, from locations where banks defaulted. Our results demonstrate that experiences gained personally, not common shocks, make individuals shy away from risk.
OriginalsprogEngelsk
TidsskriftJournal of Financial Economics
Vol/bind132
Udgave nummer3
Sider (fra-til)97-117
Antal sider21
ISSN0304-405X
DOI
StatusUdgivet - 2019

Emneord

  • Experiences
  • Risk taking
  • Financial crisis
  • Household finance

Citationsformater