Household Portfolios and Implicit Risk Preference

Alessandro Bucciol; Raffaele Miniaci

doi:10.1162/rest_a_00138

Household Portfolios and Implicit Risk Preference

Alessandro Bucciol^1,2,3; Raffaele Miniaci^4,5

¹ University of Verona · ² Network for Studies on Pensions, Aging and Retirement · ³ University of Amsterdam · ⁴ Brescia University · ⁵ University of Brescia

The Review of Economics and Statistics 2011 open access

We derive the distribution of a proxy for the risk tolerance in a representative sample of U.S. households. Our measure is deduced from the willingness to bear risk as indicated by the variance of returns of each household's observed portfolio. The estimates, obtained assuming constraints on portfolio composition, show substantial heterogeneity across households. We find that risk tolerance falls with age and increases with wealth. Other variables, such as education, gender, race, and household size, do not have a significant relation to risk attitude. Our findings are robust to changes in portfolio definition, asset returns, and sample composition.

DOI: 10.1162/rest_a_00138
Volume: 93 (4)
Pages: 1235-1250
Language: en
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