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.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

MORE ABOUT NETSPAR


Mission en strategy           •           Network           •           Organisation           •          Magazine
Board Brief            •            Actionplan 2019-2023           •           Researchagenda

ABOUT NETSPAR

Our partners

B20160708_dnb
svb
B20211216_shell download
B20160708_uva
B20200924_Ortec Finance logo 250px_banner_small
View all partners