Individual risk attitudes and the composition of financial portfolios : Evidence from German household portfolios

• This paper explores the relationship between the self-declared risk aversion of private investors and theirpropensity to hold incomplete portfolios of financial assets. The analysis is based on household surveydata from the German Socioeconomic Panel (SOEP) that provides a reliable measure of individual attitudestoward financial risk. Our findings suggest that more risk averse households tend to hold incompleteportfolios consisting mainly of a few risk-free assets. We also find that the propensity to acquire additionalassets is highly dependent on whether liquidity and safety needs are met.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Private households

Portfolio diversification

Risk aversion

Social Sciences

Samhällsvetenskap

Economics

Nationalekonomi

Publication and Content Type

ref (subject category)

art (subject category)