Once Bitten, Twice Shy

The Role of Inertia and Personal Experiences in Risk Taking

Publikation: Working paperForskning

Resumé

We study how inertia and personal experiences affect individual risk taking. Our research design relies on active portfolio decisions relating to inheritances to separate the effect of personal experiences from inertia, which otherwise would be observationally equivalent. Experience derives from investments in banks that defaulted following the financial crisis. We classify experiences into first-hand experiences, resulting from personal losses; second-hand experiences, from the losses of close family members; and third-hand experiences, from living in municipalities where banks defaulted. Our results demonstrate that experiences gained personally, aside from inertia or common shocks, explain substantial heterogeneity in individuals' risk taking.
OriginalsprogEngelsk
Udgivelses stedLondon
UdgiverCentre for Economic Policy Research
Antal sider54
StatusUdgivet - 2016
NavnCentre for Economic Policy Research. Discussion Papers
Nummer11504
ISSN0265-8003

Emneord

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

Citer dette

Andersen, S., Hanspal, T., & Meisner Nielsen, K. (2016). Once Bitten, Twice Shy: The Role of Inertia and Personal Experiences in Risk Taking. London: Centre for Economic Policy Research. Centre for Economic Policy Research. Discussion Papers, Nr. 11504
Andersen, Steffen ; Hanspal, Tobin ; Meisner Nielsen, Kasper. / Once Bitten, Twice Shy : The Role of Inertia and Personal Experiences in Risk Taking. London : Centre for Economic Policy Research, 2016. (Centre for Economic Policy Research. Discussion Papers; Nr. 11504).
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abstract = "We study how inertia and personal experiences affect individual risk taking. Our research design relies on active portfolio decisions relating to inheritances to separate the effect of personal experiences from inertia, which otherwise would be observationally equivalent. Experience derives from investments in banks that defaulted following the financial crisis. We classify experiences into first-hand experiences, resulting from personal losses; second-hand experiences, from the losses of close family members; and third-hand experiences, from living in municipalities where banks defaulted. Our results demonstrate that experiences gained personally, aside from inertia or common shocks, explain substantial heterogeneity in individuals' risk taking.",
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Once Bitten, Twice Shy : The Role of Inertia and Personal Experiences in Risk Taking. / Andersen, Steffen; Hanspal, Tobin; Meisner Nielsen, Kasper.

London : Centre for Economic Policy Research, 2016.

Publikation: Working paperForskning

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KW - Household finance

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KW - Household finance

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