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Journal of Financial and Quantitative Analysis 2026

Countercyclical Risk Aversion: Evidence from 10 Million Auto Insurance Transactions in China

Huafeng Chen1; Yinglu Deng2; Pengfei Li3; Hulai Zhang1; Hao Zhou4

1 Fudan University International School of Finance · 2 Tsinghua University, PBC School of Finance · 3 Shanghai Institute of Finance for Technology Entrepreneurship and Tsinghua University PBC School of Finance · 4 Tsinghua University PBC School of Finance and Southern University of Science and Technology College of Business

Abstract

Whether risk aversion is time-varying and countercyclical is central to modern asset pricing, yet evidence remains limited and is based mainly on experimental, survey, or aggregate stock market data. We provide individual-level evidence from 10 million Chinese auto insurance contracts from 2011 to 2017, estimating policyholders’ risk aversion from deductible choices. We find that risk aversion is time-varying and countercyclical. The estimates are negatively related to lottery and stock trading, positively related to insurance sales and bond trading, and vary with psychological factors, including seasonal mood, “zodiac year,” and calendar events.

DOI
10.1017/s0022109026103500
Pages
1-32
Language
en
Sources
crossref

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