How severe was the impact of the financial crisis on individual investor perceptions and behavior?

Based on a unique combination of monthly survey data and matching trading records, we examine how individual investor perceptions change and drive trading and risk-taking behavior during the 2007–2009 financial crisis. Investor perceptions fluctuate significantly, with risk tolerance and risk perceptions being less volatile thanreturn expectations. At the onset of the crisis, return expectations and risk tolerance sharply decline, while risk perceptions strongly increase. Towards the end of the crisis, these survey variables recover. We find substantial swings in trading and risk-taking behavior that are driven by changes in perceptions. As perceptions recover, trading and risk-taking behavior also return to pre-crisis levels. Although the crisis temporarily depresses individual investorperceptions and substantially changes their behavior, the impact of the crisis is not particularly long-lasting.

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
Netspar Brief            •            Actionplan 2019-2023           •           Researchagenda

ABOUT NETSPAR

Our partners

B20180327_logo_PGB-Pensioendiensten_grijswaarden
B20160708_aegon
B20160708_maastricht university
B20160708_B20160615_Stichting-van-de-Arbeid-logo
B20160708_radboud
View all partners