scholarly journals Perceived and Realized Risk Tolerance: Changes During the 2008 Financial Crisis

2016 ◽  
Vol 27 (2) ◽  
pp. 265-276 ◽  
Author(s):  
Diane K. Schooley ◽  
Debra Drecnik Worden
Keyword(s):  
Financial Crisis ◽  
Perceived Risk ◽  
Employment Status ◽  
Life Cycle Stage ◽  
Risk Tolerance ◽  
Portfolio Risk ◽  
Survey Of Consumer Finances ◽  
Consumer Finances ◽  
Tolerance Education ◽  
The 2008 Financial Crisis

Using the 2007–2009 Survey of Consumer Finances panel data, this study examined changes in perceived and realized risk tolerance after the financial crisis. Households who perceived less risk tolerance were more likely to have reduced their portfolio risk and vice versa. Furthermore, households whose wealth decreased were more likely to perceive less risk tolerance and vice versa. Regression analysis revealed that change in risk tolerance as measured by the change in financial portfolio risk is related to perceived risk tolerance, education, life cycle stage, and employment status. Single households, or those households whose head is less educated, or self-employed or unemployed, may need financial advice to prevent them from reducing their portfolio risk in reaction to a financial crisis.

Income precarity and the financial crisis

2017 ◽  
Vol 17 (3) ◽  
pp. 523-544 ◽  
Author(s):  
Michael Nau ◽  
Matthew Soener
Keyword(s):  
Financial Crisis ◽  
Middle Class ◽  
Income Quintile ◽  
Economic Risk ◽  
Survey Of Consumer Finances ◽  
2008 Financial Crisis ◽  
Middle Income ◽  
Consumer Finances ◽  
Working Families ◽  
The 2008 Financial Crisis

Abstract American families have become less economically secure in recent decades, and this process accelerated during the 2008 financial crisis and its immediate aftermath. This study investigates how the crisis apportioned income precarity among families compared to pre-crisis years. We use the Survey of Consumer Finances and find that working families suffered the preponderance of income losses from the crisis, although the crisis shifted income losses towards more privileged working families. In fact, middle-income working families now have the same level of income precarity as the working poor, and families in the top income quintile continue to have elevated precarity levels. This result indicates that the middle class continues to bear a growing share of economic risk and that all working families are experiencing heightened insecurity in the post-crisis era.

Decomposition Analyses of Racial/Ethnic Differences in High Return Investment Ownership After the Great Recession

2015 ◽  
Vol 26 (1) ◽  
pp. 43-62 ◽  
Author(s):  
Su Hyun Shin ◽  
Sherman D. Hanna
Keyword(s):  
Ethnic Differences ◽  
Decomposition Methods ◽  
Risk Tolerance ◽  
Survey Of Consumer Finances ◽  
Income Risk ◽  
The Great Recession ◽  
Consumer Finances ◽  
High Return ◽  
Tolerance Education ◽  
Racial Ethnic

We investigated racial/ethnic differences in high return investment ownership using the 2010 Survey of Consumer Finances (SCF). Logistic regression analysis shows that even after controlling for income, risk tolerance, education, and other factors, Black and Hispanic households are less likely to hold high return investments than White households, but Asian/Other households are not different from White households. Based on results from decomposition methods, if the households with Black and with Hispanic respondents have the same characteristics and risk tolerance as White households, the racial/ethnic gap in high return investment ownership would be narrowed, but still exists. The Fairlie decomposition method might be more reasonable to use for decomposition analyses than the Blinder-Oaxaca method.

The Risk Tolerance Measure in the 2016 Survey of Consumer Finances: New, But Is It Improved?

2021 ◽  
pp. JFCP-19-00022
Author(s):  
Kyoung Tae Kim ◽  
Sherman D. Hanna ◽  
Dongyue Ying
Keyword(s):  
Negative Relationship ◽  
Risk Tolerance ◽  
Stock Ownership ◽  
Survey Of Consumer Finances ◽  
Consumer Finances ◽  
Two Measures ◽  
Complex Patterns ◽  
Relationship Of ◽  
The Relationship ◽  
Different Levels

The Survey of Consumer Finances (SCF) has included a 4-level risk tolerance measure since 1983. In 2016, the SCF also included an 11-level risk tolerance measure. We compare the two measures, and develop suggestions for using the new measure. While the new measure is seemingly simpler than the old measure, we demonstrate that it does not have a monotonic relationship with owning stock assets, with a pattern similar to the relationship of the old measure to stock ownership. We also identify complex patterns of factors related to different levels of the new measure, for instance education has a negative relationship at one level but positive at another level. Those using the new measure should consider the complex patterns we demonstrate.

scholarly journals Inter-Observer Risk-Tolerance Agreement Between Husbands And Wives

2011 ◽  
Vol 9 (2) ◽  
Author(s):  
Joseph W. Goetz ◽  
John Gilliam ◽  
John E. Grable
Keyword(s):  
Null Hypothesis ◽  
Financial Risk ◽  
Married Couples ◽  
Risk Tolerance ◽  
Survey Of Consumer Finances ◽  
Chi Square ◽  
Consumer Finances ◽  
Chi Square Analysis ◽  
Financial Risk Tolerance ◽  
Level Of Agreement

<p class="MsoBodyText" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="color: black; font-size: 10pt; mso-themecolor: text1;"><span style="font-family: Times New Roman;">The purpose of this research was to test the extent to which variability in husbands&rsquo; and wives&rsquo; self-assessed financial risk can be attributed to variation in risk tolerance or observer bias resulting from measurement error. Using a sample of 188 well-educated married couples, scores from the Survey of Consumer Finances single risk-assessment item were used to evaluate the following null hypothesis: Husbands and wives do not agree on their level of financial risk tolerance. The hypothesis was tested using a percentage agreement test, a Kappa coefficient test, and a chi-square analysis. Findings led to a rejection of the null hypothesis. That is, couples exhibited general agreement in their assessment of financial risk tolerance, although the level of agreement was rather modest. </span></span></p>

scholarly journals Run for the hills: Italian investors' risk appetite before and during the financial crisis

2020 ◽  
Vol 38 (5) ◽  
pp. 1195-1213
Author(s):  
Andrea Lippi ◽  
Simone Rossi
Keyword(s):  
Financial Crisis ◽  
Risk Tolerance ◽  
Financial Advisors ◽  
Content Type ◽  
Risk Appetite ◽  
The 2008 Financial Crisis ◽  
Asset Allocations ◽  
The Relationship ◽  
Asset Managers ◽  
Practical Implications

PurposeThis paper sets out to corroborate the existing literature on investors' risk tolerance and to assess how the 2008 financial crisis has affected risk tolerance among Italian investors.Design/methodology/approachBased on a unique dataset of real-world portfolio choices made by 1,245 Italian investors over a period of 15 years (from 2003 to 2017), this paper presents two steps of analysis. In step 1, the whole period 2003–2017 is considered with the aim to integrate and corroborate the existing literature on the topic of risk tolerance, considering a complete economic and financial cycle. Step 2 took 2008 as the pivotal point between pre-crisis (2003–2008) and crisis (2009–2017) with the aim to observe the influence on risk appetite of the economic and financial effects of the crisis.FindingsThe results obtained confirm that men are more risk tolerant than women and older people are less risk-taking than their younger counterparts, although the relationship between age and risk tolerance is not necessarily linear. Moreover, our paper demonstrates that a crisis scenario has an influence on Italian investors' risk tolerance.Practical implicationsOur results are of interest to financial advisors, financial planners, asset managers, psychologists, behavioral researchers and more in general to providers of financial products and services.Originality/valueThe results presented in this paper are relevant and original because they are based on real investors who made real choices concerning their portfolio asset allocations.

scholarly journals Do Employee Share Owners Face Too Much Financial Risk?

ILR Review ◽  
2021 ◽  
pp. 001979392110073
Author(s):  
Douglas Kruse ◽  
Joseph Blasi ◽  
Dan Weltmann ◽  
Saehee Kang ◽  
Jung Ook Kim ◽  
...  
Keyword(s):  
Financial Risk ◽  
Risk Tolerance ◽  
Risk Theory ◽  
Financial Knowledge ◽  
Survey Of Consumer Finances ◽  
Small Minority ◽  
Share Ownership ◽  
Consumer Finances ◽  
Substantial Problem ◽  
Excessive Risk

A major theoretical objection against employee share ownership is that workers are exposed to excessive financial risk. Theory posits that 10 to 15% of a typical worker’s wealth portfolio can be prudently invested in employer stock. The authors analyze employee share ownership in US family portfolios using the 2004 to 2016 Survey of Consumer Finances. Overall, 15.3% of families with private-sector employees held employer stock in 2016, and one in six of these families exceeded the 15% threshold. Employee share ownership appears to generally add to, rather than substitute for, both pension and overall wealth. Employee share owners express higher risk tolerance and financial knowledge and greater understanding of the value of diversification. While financial risk does not appear to be a substantial problem for most employee share owners, a small minority may face excessive risk, and the authors suggest approaches to reduce such risk.

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