Macroeconomic experiences and risk taking of euro area households

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may MacroeconoMic exPerienceS and riSk Taking of euro area houSeholdS Miguel Ampudia and Michael EhrmannIn 2014 all ECB publications feature a motif taken from the €20 banknote.noTe: This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB. The HFCN collects household-level data on households' finances and consumption in the euro area through a harmonised survey. The HFCN aims at studying in depth the micro-level structural information on euro area households' assets and liabilities. The objectives of the network are:1) understanding economic behaviour of individual households, developments in aggregate variables and the interactions between the two;2) evaluating the impact of shocks, policies and institutional changes on household portfolios and other variables;3) understanding the implications of heterogeneity for aggregate variables; 4) estimating choices of different households and their reaction to economic shocks; 5) building and calibrating realistic economic models incorporating heterogeneous agents; 6) gaining insights into issues such as monetary policy transmission and financial stability.The refereeing process of this paper has been co-ordinated by a team composed of Gabriel Fagan (ECB), Pirmin Fessler (Oesterreichische Nationalbank), Michalis Haliassos (Goethe University Frankfurt) , Tullio Jappelli (University of Naples Federico II), Sébastien PérezDuarte (ECB), Jiri Slacalek (ECB), Federica Teppa (De Nederlandsche Bank), Peter Tufano (Oxford University) and Philip Vermeulen (ECB).The paper is released in order to make the results of HFCN research generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the author's own and do not necessarily reflect those of the ESCB. AcknowledgementsThis paper uses data from the Eurosystem Household Finance and Consumption Survey. It presents the authors' personal opinions and does not necessarily reflect the views of the European Central Bank, the Eurosystem Household Finance and Consumption Network or the Bank of Canada. We are grateful to Ulrike Malmendier and Stefan Nagel for making their econometric code available, Tetti Tzamourani for help with some data, and thank Dimitris Christelis, Carlos García de Andoain, Dimitris Georgarakos, Nathan...

Credit supply shocks and household leverage: Evidence from the US banking deregulation

“…Households with heads at the early stages of the lifecycle appear to be less inclined to hold high risk assets, as is also the case for being non-white and having relatively low levels of education. These effects accord with intuition as well as the existing literature (see, e.g., Guiso et al, 1996;Guiso and Paiella, 2008;Ampudia and Ehrmann, 2017). 4 Active versus inactive investors…”

“…There are a small number of studies that consider the role of the underlying macroeconomic and financial conditions but they do not investigate the effects of monetary policy. Such studies have found that risk preferences, in general, and household asset allocation in particular, are linked to the economic environment (Christelis et al, 2013), business cycle fluctuations (Bucciol and Miniaci, 2015), and exposure to past economic and financial crises (Malmendier and Nagel, 2011;Ampudia and Ehrmann, 2017). The empirical findings in this paper are in line with monetary policy shocks exerting an important effect on risk preferences even after controlling for micro-characteristics and macro-conditions.…”

Financial Risk Propensity, Business Cycles and Perceived Risk Exposure

“…Their main finding is that individuals who lived during periods of low stock market returns report lower willingness to bear risk and, consistently, are less likely to hold risky financial assets, while realized volatility has no significant impact on household portfolio choice. Ampudia and Hermann () confirm their results for a set of European countries. Due to the lack of panel data, Malmendier and Nagel () were unable to distinguish between individuals whose portfolio was only marginally affected by the poor stock market performance (because of their negligible investments in equity), and those whose financial wealth was seriously exposed to stock market risk.…”

The Impact of Long-Run Macroeconomic Experiences on Personality

“…A possible explanation is that the stock market return series I use is much shorter than theirs, and does not include the years of the Great Depression. Ampudia & Ehrmann (2014) replicate the Malmendier and Nagel study for the Eurozone-including the Netherlands-and do find that experienced stock market returns affect risk aversion and stock holding. All regressions include the following variables: individual fixed effects, year dummies, age and age squared partner, city, education dummies, dummies for occupation status, and the presence of children in the household.…”