Household portfolios and implicit risk preference

We derive the distribution of a proxy for the risk tolerance in a representative sample of US households. Our measure is deduced from the willingness to bear risk as indicated by the variance of returns of each household’s observed portfolio. The estimates, obtained assuming constraints on portfolio composition, show substantial heterogeneity across households. We find risk tolerance to reduce with age and increase with wealth. Other variables such as education,gender, race and household size do not have instead a significant relation with risk attitude. Our findings are robust to changes in portfolio definition, asset returns and sample composition.