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Can Risk‐Averse Households Make Risky Investments? The Role of Trust in Others
Author(s) -
Bucciol Alessandro,
Cavasso Barbara,
Zarri Luca
Publication year - 2019
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12278
Subject(s) - risk aversion (psychology) , economics , financial risk , survey data collection , actuarial science , demographic economics , business , financial economics , expected utility hypothesis , statistics , mathematics
In this paper, using data from the Survey on Health, Ageing and Retirement in Europe (SHARE, 2006 and 2013 waves), we illustrate the link between individuals’ attitudes to financial risk combined with their willingness to trust others, and their investments in risky assets. Individuals who display either risk tolerance alone or – to a lesser extent – risk aversion and trust more frequently decide to buy risky assets. The comparison between Scandinavian and Mediterranean countries indicates that trust plays qualitatively different roles depending on the prevailing combination of risk attitude and trust in the area being studied.