Abstract
Selected households declaring unwillingness to take any financial risk hold diversified risky assets, such as publicly-traded shares, other equities, bonds and mutual fund units. Our study aims to identify socio-demographics and socio-economics, which are decisive for this propensity in Belgium, Finland, France, Germany, and Spain. It also aims to describe two profiles of risk-averse households—with a tendency to diversify risky assets in portfolios and with a tendency to avoid risky investments. In the study, we apply the Poisson regression model for individual countries as well as for the entire group of countries. We use microdata from the second wave of the Eurosystem’s Household Finance and Consumption Survey. The results obtained allow us to conclude that the propensity to hold diversified types of risky assets mostly refers to these subjectively risk-averse households that receive high incomes and are represented by well-educated persons aged 40+. Opposite to the above, the propensity to behave in a consistent manner on the retail financial market, i.e., to avoid risky assets, is primarily an attribute of low-income households with poorly educated, young, and divorced responding persons. We also identify other characteristics of households in question that complete the above profiles, related to their size, sources of incomes and types of marital status or gender of responding persons. However, their significance can be concluded only at the domestic level.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Alessie RJM, Hochguertel S, van Soest A (2002) Household portfolios in the Netherlands. In: Guiso L, Haliassos M, Jappelli T (eds) MIT, Cambridge, pp 341–388
Bakshi GS, Chen Z (1994) Baby boom, population aging, and capital markets. J Bus 67(2):165–202
Bucciol A, Miniaci R (2010) Household portfolios and implicit risk preference. https://www.unibs.it/sites/default/files/ricerca/allegati/1006.pdf. Accessed 15 May 2020
Calvet LE, Sodini P (2014) Twin picks: disentangling the determinants of risk-taking in household portfolios. J Financ LXIX(2):867–906
Chang C-C, DeVaney SA, Chiremba ST (2004) Determinants of subjective and objective risk tolerance. J Pers Financ 3:53–67
Coleman S (2003) Risk tolerance and the investment behavior of Black and Hispanic heads of household. J Financ Couns Plan 14:43–52
Deaves RE, Veit T, Bhandari G, Cheney J (2007) The savings and investment decisions of planners: a cross sectional study of college employees. Financ Services Rev 16:117–133
EC (2012) Special Eurobarometer 373. Retail financial services. https://ec.europa.eu/commfrontoffice/publicopinion/archives/ebs/ebs_373_sum_en.pdf. Accessed 26 May 2020
ECB (2016) The household finance and consumption survey. Results from the second wave. ECB Stat Pap 18:1–138
Gibson R, Michayluk D, Van de Venter G (2013) Financial risk tolerance: an analysis of unexplored factors. Financ Services Rev 22(1):23–50
Gilliam JE, Goetz JW, Hampton VL (2008) Spousal differences in financial risk tolerance. J Financ Counsel Plan 19:3–11
Grable JE (2000) Financial risk tolerance and additional factors that affect risk taking in everyday money matters. J Bus Psychol 14(4):625–630
Grable JE (2016) Financial risk tolerance. In: Xiao JJ (ed) Handbook of consumer finance research. Springer International, Cham, pp 19–31
Grable JE, Joo S-H (2004) Environmental and biopsychosocial factors associated with financial risk tolerance. J Financ Couns Plan 15:73–80
Grable JE, Lytton RH (2001) Assessing the concurrent validity of the SCF risk assessment item. J Financ Couns Plan 12:43–52
Haliassos M, Bertaut CC (1995) Why do so few hold stocks? Econ J 105:1110–1129
Hallahan TA, Faff RW, McKenzie MD (2004) An empirical investigation of personal financial risk tolerance. Financ Services Rev 13:57–78
Hanna SD, Gutter MS, Fan JX (2001) A measure of risk tolerance based on economic theory. J Financ Couns Plan 12(2):53–60
Hanna SD, Waller W, Finke M (2008) The concept of risk tolerance in personal financial planning. J Pers Financ 7:96–108
Hilbe J (2014) Modeling count data. Cambridge University Press, Cambridge
Irwin CE (1993) Adolescence and risk taking: how are they related? In: Bell NJ, Bell RW (eds) Adolescent risk taking. SAGE, Newbury Park, CA, pp 7–28
Jianakoplos NA, Bernasek A (1998) Are women more risk-averse. Econ Inq 36:620–630
Kimbal MS, Sahm CR, Shapiro MD (2007) Imputing risk tolerance from survey responses. https://www.nber.org/papers/w13337. Accessed 20 Dec 2019
Kochaniak K, Ulman P (2020) Risk-intolerant but risk-taking—towards a better understanding of inconsistent survey responses of the euro area households. Sustainability 12(17) 6912:1–26
Marinelli N, Mazzoli C, Palmucci F (2017) Mind the gap: inconsistencies between subjective and objective financial risk tolerance. J Behav Financ 05:1–12
Martin TK (2011) Financial planners and the risk tolerance gap. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2358736. Accessed 02 May 2020
Moreschi P (2005) An analysis of the ability of individuals to predict their own risk tolerance. J Bus Econ Res 3:39–48
Nosic A, Weber M (2007) Determinants of risk taking behavior: the role of risk attitudes, risk perceptions and beliefs. https://madoc.bib.uni-mannheim.de/1774/1/001_SSRN_ID1027453_code846681.pdf. Accessed 02 May 2019
Roszkowski MJ, Grable J (2005) Estimating risk tolerance: the degree of accuracy and the paramorphic representation of the estimate. J Financ Couns Plan 16:29–47
Sahm CR (2007) How much does risk tolerance change? https://www.federalreserve.gov/pubs/feds/2007/200766/200766pap.pdf. Accessed 05 May 2020
Schooley DK, Worden DD (1996) Risk aversion measures: comparing attitudes and asset allocation. Financ Services Rev 5(2):87–99
Slovic P (2004) The perception of risk. Earthscan, London
Stewart W, Roth P (2001) Risk propensity differences between entrepreneurs and managers: a meta-analytic review. J Appl Psychol 86:145–153
Vissing-Jorgensen A (2002) Towards an explanation of household portfolio choice heterogeneity: nonfinancial income and participation cost structures. https://www.nber.org/papers/w8884.pdf. Accessed 15 Jan 2020
Warneryd K-E (1996) Risk attitudes and risky behavior. J Econ Psychol 17:749–770
Weber EU, Blais A-R, Betz N (2002) A domain-specific risk-attitude scale: measuring risk perceptions and risk behaviors. J Behav Decis Mak 15:263–290
Weller JA, Levin IP, Bechara A (2010) Do individual differences in Iowa Gambling Task performance predict adaptive decision making for risky gains and losses? J Clin Exp Neuropsychol 32:141–150
Winkelmann R (2008) Econometric analysis of count data. Springer, New York
Yao R, Curl A (2011) Do market returns influence risk tolerance? Evidence from panel data. J Family Econ Iss 32:532–544
Yao R, Hanna SD (2005) The effect of gender and marital status on financial risk tolerance. J Pers Financ 4:66–85
Yao R, Gutter MS, Hanna SD (2005) The financial risk tolerance of Blacks, Hispanics and Whites. J Financ Counsel Plan 16:51–62
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2021 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this paper
Cite this paper
Kochaniak, K., Ulman, P. (2021). Diversified Risky Financial Assets in Portfolios of Risk-Averse Households: What Determines Their Occurrence?. In: Jajuga, K., Locarek-Junge, H., Orlowski, L.T., Staehr, K. (eds) Contemporary Trends and Challenges in Finance . Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-73667-5_14
Download citation
DOI: https://doi.org/10.1007/978-3-030-73667-5_14
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-73666-8
Online ISBN: 978-3-030-73667-5
eBook Packages: Economics and FinanceEconomics and Finance (R0)