Risk Attitudes and Household Wealth: A Further Discussion Based on China Micro Survey
ZHANG Linwan, WU Weixing
Research Center of Applied Finance/School of Banking and Finance, University of International Business and Economics; School of Finance,Capital University of Economics and Business
Abstract:
With the capital market growing fast and risky returns fluctuating remarkably, research on the function of wealth on risk attitudes has great implications for the study of household portfolio allocations and related policy making. This paper for the first time builds a system of indicators of absolute and relative risk attitudes to analyze the empirical relation between the risk preferences of Chinese households and wealth, using representative survey data. It shows that absolute risk aversion decreases with wealth, while relative risk aversion increases, rejecting typically assumptions of CARA and CRRA in economic modeling. Moreover, we find that controlling background risk will make the effect of wealth on risk attitudes no longer significant, which implies that background risk performs as the intermediate that wealth affects risk attitudes. Changes of wealth make a difference in background risk levels and risk tolerance, as well as asset allocation, which means that policies smoothing economy will contribute to encouraging financial market participation.
张琳琬, 吴卫星. 风险态度与居民财富——来自中国微观调查的新探究[J]. 金融研究, 2016, 430(4): 115-127.
ZHANG Linwan, WU Weixing. Risk Attitudes and Household Wealth: A Further Discussion Based on China Micro Survey. Journal of Financial Research, 2016, 430(4): 115-127.
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