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Financial Risk Taking by Age and Birth Cohort
Author(s) -
Jianakoplos Nancy Ammon,
Bernasek Alexandra
Publication year - 2006
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2006.tb00749.x
Subject(s) - cohort , portfolio , social security , asset (computer security) , cohort effect , actuarial science , financial security , stock (firearms) , population , economics , demographic economics , demography , finance , business , medicine , geography , market economy , computer security , sociology , computer science , archaeology
This study decomposes the effects of chronological age, birth cohort, and calendar year on the age profile of household financial risk taking. Using two measures of risk taking, one based on observed portfolio allocations of wealth and another based on survey respondents' stated willingness to take risk, the results support the conventional wisdom that risk taking decreases with age. The results also reveal a cohort effect that shifts the age‐risk profile down from older to younger cohorts. This finding is consistent with households taking less risk in response to decreasing financial security over time. The results have implications for the impact of an aging population on stock prices and for the impact on household well‐being of the trend toward individual responsibility for asset management in vehicles such as defined‐contribution pensions and the proposed Social Security personal accounts.