Risk aversion and wealth: evidence from person-to-person lending portfolios

Paravisini, Daniel ORCID: 0009-0006-8803-8442, Rappoport, Veronica ORCID: 0009-0007-3665-4304 and Ravina, Enrichetta (2010) Risk aversion and wealth: evidence from person-to-person lending portfolios. NBER working paper (16063). National Bureau of Economic Research, Massachusetts, USA.

Full text not available from this repository.

Abstract

We estimate risk aversion from the actual financial decisions of 2,168 investors in Lending Club (LC), a person-to-person lending platform. We develop a methodology that allows us to estimate risk aversion parameters from each portfolio choice. Since the same individual makes repeated investments, we are able to construct a panel of risk aversion parameters that we use to disentangle heterogeneity in attitudes towards risk from the elasticity of investor-specific risk aversion to changes in wealth. In the cross section, we find that wealthier investors are more risk averse. Using changes in house prices as a source of variation, we find that investors become more risk averse after a negative wealth shock. These preferences consistently extrapolate to other investor decisions within LC.

Item Type:	Monograph (Working Paper)
Official URL:	http://www.nber.org/
Additional Information:	© 2010 The authors
Divisions:	Finance
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
JEL classification:	D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
Date Deposited:	16 Apr 2012 13:06
Last Modified:	01 Nov 2024 04:53
URI:	http://eprints.lse.ac.uk/id/eprint/43115

Actions (login required)

View Item