Stock market expectations and risk aversion of individual investors

    Research output: Contribution to journalArticleResearchpeer-review

    8 Citations (Scopus)

    Abstract

    We study the relationship between stock market return expectations and risk aversion of individuals and test whether the joint effects arising from the interaction of these two variables affect investment decisions. Using data from the Dutch National Bank Household Survey, we find that higher risk aversion is associated with lower stock market expectations. We identify significant and negative effects on the probability that individuals invest in stocks arising from the interaction between stock market expectations and risk aversion. These effects are in addition to a significant and positive impact from stock market return expectations as well as a significant and negative effect from risk aversion separately. However, once individuals participate in the stock market, their stock market expectations alone remain significant in determining their portfolio allocation decisions.
    Original languageEnglish
    Pages (from-to)122 - 131
    Number of pages10
    JournalInternational Review of Financial Analysis
    Volume40
    DOIs
    Publication statusPublished - 2015

    Cite this

    @article{e5c57f1ec1554750b634741bc227253a,
    title = "Stock market expectations and risk aversion of individual investors",
    abstract = "We study the relationship between stock market return expectations and risk aversion of individuals and test whether the joint effects arising from the interaction of these two variables affect investment decisions. Using data from the Dutch National Bank Household Survey, we find that higher risk aversion is associated with lower stock market expectations. We identify significant and negative effects on the probability that individuals invest in stocks arising from the interaction between stock market expectations and risk aversion. These effects are in addition to a significant and positive impact from stock market return expectations as well as a significant and negative effect from risk aversion separately. However, once individuals participate in the stock market, their stock market expectations alone remain significant in determining their portfolio allocation decisions.",
    author = "Boram Lee and Leonard Rosenthal and Veld, {Christianus Henricus} and Veld-Merkoulova, {Joulia Wiktorowna}",
    year = "2015",
    doi = "10.1016/j.irfa.2015.05.011",
    language = "English",
    volume = "40",
    pages = "122 -- 131",
    journal = "International Review of Financial Analysis",
    issn = "1057-5219",
    publisher = "Elsevier",

    }

    Stock market expectations and risk aversion of individual investors. / Lee, Boram; Rosenthal, Leonard; Veld, Christianus Henricus; Veld-Merkoulova, Joulia Wiktorowna.

    In: International Review of Financial Analysis, Vol. 40, 2015, p. 122 - 131.

    Research output: Contribution to journalArticleResearchpeer-review

    TY - JOUR

    T1 - Stock market expectations and risk aversion of individual investors

    AU - Lee, Boram

    AU - Rosenthal, Leonard

    AU - Veld, Christianus Henricus

    AU - Veld-Merkoulova, Joulia Wiktorowna

    PY - 2015

    Y1 - 2015

    N2 - We study the relationship between stock market return expectations and risk aversion of individuals and test whether the joint effects arising from the interaction of these two variables affect investment decisions. Using data from the Dutch National Bank Household Survey, we find that higher risk aversion is associated with lower stock market expectations. We identify significant and negative effects on the probability that individuals invest in stocks arising from the interaction between stock market expectations and risk aversion. These effects are in addition to a significant and positive impact from stock market return expectations as well as a significant and negative effect from risk aversion separately. However, once individuals participate in the stock market, their stock market expectations alone remain significant in determining their portfolio allocation decisions.

    AB - We study the relationship between stock market return expectations and risk aversion of individuals and test whether the joint effects arising from the interaction of these two variables affect investment decisions. Using data from the Dutch National Bank Household Survey, we find that higher risk aversion is associated with lower stock market expectations. We identify significant and negative effects on the probability that individuals invest in stocks arising from the interaction between stock market expectations and risk aversion. These effects are in addition to a significant and positive impact from stock market return expectations as well as a significant and negative effect from risk aversion separately. However, once individuals participate in the stock market, their stock market expectations alone remain significant in determining their portfolio allocation decisions.

    U2 - 10.1016/j.irfa.2015.05.011

    DO - 10.1016/j.irfa.2015.05.011

    M3 - Article

    VL - 40

    SP - 122

    EP - 131

    JO - International Review of Financial Analysis

    JF - International Review of Financial Analysis

    SN - 1057-5219

    ER -