Twin Picks: Disentangling the Determinants of Risk‐Taking in Household Portfolios
Laurent E. Calvet,Paolo Sodini +1 more
Abstract:
This paper investigates risk-taking in the liquid portfolios held by a large panel of Swedish twins. We document that the portfolio share invested in risky assets is an increasing and concave function of financial wealth, leading to different risk sensitivities across investors. Human capital, which we estimate directly from individual labor income, also affects risk-taking positively, while internal habit and expenditure commitments tend to reduce it. Our microfindings lend strong support to decreasing relative risk aversion and habit formation preferences. Furthermore, heterogeneous risk sensitivities across investors help reconcile individual preferences with representative-agent models.read more
Citations
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CEO gender, corporate risk-taking, and the efficiency of capital allocation
TL;DR: In this paper, the authors extend the literature on how managerial traits relate to corporate choices by documenting that firms run by female CEOs have lower leverage, less volatile earnings, and a higher chance of survival than otherwise similar firms running by male CEOs, and that transitions from male to female CEOs are associated with economically and statistically significant reductions in corporate risk-taking.
Journal ArticleDOI
IQ and stock market participation
TL;DR: For example, this article found that high-IQ investors are more likely to hold mutual funds and larger numbers of stocks, experience lower risk, and earn higher Sharpe ratios than others.
Journal ArticleDOI
Optimal Financial Knowledge and Wealth Inequality.
TL;DR: This article showed that financial knowledge is a key determinant of wealth inequality in a stochastic life cycle model with endogenous financial knowledge accumulation, where financial knowledge enables individuals to better allocate lifetime resources in a world of uncertainty and imperfect insurance.
Book ChapterDOI
Chapter 21 - Household Finance: An Emerging Field∗
Luigi Guiso,Paolo Sodini +1 more
TL;DR: A review of the evolution and most recent developments of household finance can be found in this article, with a focus on the normative and positive study of how households use financial markets to achieve their objectives.
Journal ArticleDOI
Evidence for Countercyclical Risk Aversion: An Experiment with Financial Professionals †
TL;DR: For example, this paper found that subjects who were primed with a financial bust were substantially more fearful and risk averse than those who were pre-posed with a boom, suggesting that fear may play an important role in countercyclical risk aversion.
References
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