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Luigi Zingales - One of the best experts on this subject based on the ideXlab platform.

  • time varying risk aversion
    Journal of Financial Economics, 2018
    Co-Authors: Luigi Guiso, Paola Sapienza, Luigi Zingales
    Abstract:

    We use a Repeated Survey of an Italian bank’s clients to test whether investors’ risk aversion increases following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increases substantially after the crisis. After considering standard explanations, we investigate whether this increase might be an emotional response (fear) triggered by a scary experience. To show the plausibility of this conjecture, we conduct a lab experiment. We find that subjects who watched a horror movie have a certainty equivalent that is 27% lower than the ones who did not, supporting the fear-based explanation. Finally, we test the fear-based model with actual trading behavior and find consistent evidence.

  • time varying risk aversion
    Research Papers in Economics, 2013
    Co-Authors: Luigi Guiso, Paola Sapienza, Luigi Zingales
    Abstract:

    We use a Repeated Survey of a large sample of clients of an Italian bank to measure possible changes in investors’ risk aversion following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increase substantially after the crisis. These changes are correlated with changes in portfolio choices, but do not seem to be correlated with “standard” factors that affect risk aversion, such as wealth, consumption habit, and background risk. This opens the possibility that psychological factors might be driving it. To test whether a scary experience (as the financial crisis) can trigger large increases in risk aversion, we conduct a lab experiment. We find that indeed students who watched a scary video have a certainty equivalent that is 27% lower than the ones who did not. Following a sharp drop in stock prices,a fear model predicts that individuals should sell stocks, while the habit model has the opposite implications; people should actively buy stocks to bring the risky assets to the new optimal level. We show that after the drop in stock prices in 2008 individuals rebalanced their portfolio in a way consistent to a fear model.

Alec Zuo - One of the best experts on this subject based on the ideXlab platform.

  • How stable are Australian farmers’ climate change risk perceptions? New evidence of the feedback loop between risk perceptions and behaviour
    Global Environmental Change, 2021
    Co-Authors: Sarah Ann Wheeler, Céline Nauges, Alec Zuo
    Abstract:

    The exact relationship between people’s climate change attitudes and behaviour is a topic that engages policy- makers and researchers worldwide. Do climate change attitudes influence behaviour or is it possible that behaviour can change attitudes? This study uses a unique Repeated Survey dataset of 275 farmers (irrigators) in the southern Murray-Darling Basin from 2010–11 to 2015–16, to explore the dynamic relationship between climate change risk perceptions and farm adaptation behaviour. Farmers who had an increased risk exposure (expressed through higher debt, larger irrigated areas, greater share of permanent crops, and located in areas with higher temperatures and less rainfall) were more likely to agree climate change posed a risk. Whilst farmers became more accepting towards climate change over the time-period, a significant percentage of these attitudes were unstable. One reason suggested for this instability is the presence of a feedback loop between risk per-ceptions and behaviour. Namely, new evidence was found that farmers who agreed climate change was a risk in 2010–11, were more likely to undertake farm production decisions to reduce that risk (e.g. changing crop mix, reducing irrigated area and consequently selling water entitlements) – which had the impact of negatively feeding back and reducing their stated climate change risk perceptions in 2015–16. Conversely, farmers who were originally deniers were more likely to undertake somewhat riskier farm production decisions (e.g. increasing water utilisation rates and irrigation areas) – which consequently had the impact of positively increasing their climate change risk perceptions in 2015–16

Paola Sapienza - One of the best experts on this subject based on the ideXlab platform.

  • time varying risk aversion
    Journal of Financial Economics, 2018
    Co-Authors: Luigi Guiso, Paola Sapienza, Luigi Zingales
    Abstract:

    We use a Repeated Survey of an Italian bank’s clients to test whether investors’ risk aversion increases following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increases substantially after the crisis. After considering standard explanations, we investigate whether this increase might be an emotional response (fear) triggered by a scary experience. To show the plausibility of this conjecture, we conduct a lab experiment. We find that subjects who watched a horror movie have a certainty equivalent that is 27% lower than the ones who did not, supporting the fear-based explanation. Finally, we test the fear-based model with actual trading behavior and find consistent evidence.

  • time varying risk aversion
    Research Papers in Economics, 2013
    Co-Authors: Luigi Guiso, Paola Sapienza, Luigi Zingales
    Abstract:

    We use a Repeated Survey of a large sample of clients of an Italian bank to measure possible changes in investors’ risk aversion following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increase substantially after the crisis. These changes are correlated with changes in portfolio choices, but do not seem to be correlated with “standard” factors that affect risk aversion, such as wealth, consumption habit, and background risk. This opens the possibility that psychological factors might be driving it. To test whether a scary experience (as the financial crisis) can trigger large increases in risk aversion, we conduct a lab experiment. We find that indeed students who watched a scary video have a certainty equivalent that is 27% lower than the ones who did not. Following a sharp drop in stock prices,a fear model predicts that individuals should sell stocks, while the habit model has the opposite implications; people should actively buy stocks to bring the risky assets to the new optimal level. We show that after the drop in stock prices in 2008 individuals rebalanced their portfolio in a way consistent to a fear model.

Luigi Guiso - One of the best experts on this subject based on the ideXlab platform.

  • time varying risk aversion
    Journal of Financial Economics, 2018
    Co-Authors: Luigi Guiso, Paola Sapienza, Luigi Zingales
    Abstract:

    We use a Repeated Survey of an Italian bank’s clients to test whether investors’ risk aversion increases following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increases substantially after the crisis. After considering standard explanations, we investigate whether this increase might be an emotional response (fear) triggered by a scary experience. To show the plausibility of this conjecture, we conduct a lab experiment. We find that subjects who watched a horror movie have a certainty equivalent that is 27% lower than the ones who did not, supporting the fear-based explanation. Finally, we test the fear-based model with actual trading behavior and find consistent evidence.

  • time varying risk aversion
    Research Papers in Economics, 2013
    Co-Authors: Luigi Guiso, Paola Sapienza, Luigi Zingales
    Abstract:

    We use a Repeated Survey of a large sample of clients of an Italian bank to measure possible changes in investors’ risk aversion following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increase substantially after the crisis. These changes are correlated with changes in portfolio choices, but do not seem to be correlated with “standard” factors that affect risk aversion, such as wealth, consumption habit, and background risk. This opens the possibility that psychological factors might be driving it. To test whether a scary experience (as the financial crisis) can trigger large increases in risk aversion, we conduct a lab experiment. We find that indeed students who watched a scary video have a certainty equivalent that is 27% lower than the ones who did not. Following a sharp drop in stock prices,a fear model predicts that individuals should sell stocks, while the habit model has the opposite implications; people should actively buy stocks to bring the risky assets to the new optimal level. We show that after the drop in stock prices in 2008 individuals rebalanced their portfolio in a way consistent to a fear model.

Sarah Ann Wheeler - One of the best experts on this subject based on the ideXlab platform.

  • How stable are Australian farmers’ climate change risk perceptions? New evidence of the feedback loop between risk perceptions and behaviour
    Global Environmental Change, 2021
    Co-Authors: Sarah Ann Wheeler, Céline Nauges, Alec Zuo
    Abstract:

    The exact relationship between people’s climate change attitudes and behaviour is a topic that engages policy- makers and researchers worldwide. Do climate change attitudes influence behaviour or is it possible that behaviour can change attitudes? This study uses a unique Repeated Survey dataset of 275 farmers (irrigators) in the southern Murray-Darling Basin from 2010–11 to 2015–16, to explore the dynamic relationship between climate change risk perceptions and farm adaptation behaviour. Farmers who had an increased risk exposure (expressed through higher debt, larger irrigated areas, greater share of permanent crops, and located in areas with higher temperatures and less rainfall) were more likely to agree climate change posed a risk. Whilst farmers became more accepting towards climate change over the time-period, a significant percentage of these attitudes were unstable. One reason suggested for this instability is the presence of a feedback loop between risk per-ceptions and behaviour. Namely, new evidence was found that farmers who agreed climate change was a risk in 2010–11, were more likely to undertake farm production decisions to reduce that risk (e.g. changing crop mix, reducing irrigated area and consequently selling water entitlements) – which had the impact of negatively feeding back and reducing their stated climate change risk perceptions in 2015–16. Conversely, farmers who were originally deniers were more likely to undertake somewhat riskier farm production decisions (e.g. increasing water utilisation rates and irrigation areas) – which consequently had the impact of positively increasing their climate change risk perceptions in 2015–16