Risky assets in Europe and the US: risk vulnerability, risk aversion and economic environment

Bekhtiar, Karim; Fessler, Pirmin and Lindner, Peter (2019) Risky assets in Europe and the US: risk vulnerability, risk aversion and economic environment. European Central Bank, ECB Working Paper Series 2270, 36 p.

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Abstract or Table of Contents

We use cross-country microdata to analyse the risk taking of households in Europe and the US. Concerning the extensive as well as the intensive margin of risky assets, European households differ substantially from US households; but also inside Europe we document substantial differences. Furthermore, average risk aversion is strongly correlated with the share of households holding risky assets across countries. We decompose the observed differences into two parts. A part explainable by household characteristics as well as differences in risk aversion and a remainder. We employ the unexplained part resulting from our microeconometric decomposition analysis together with country-level variables on the economic environment to relate observed differences in risky asset holdings to institutional ones. We find that institutional differences such as shareholder protection are strongly correlated with the unexplainable differences with regard to holdings of risky assets.

Item Type: Discussion/ Working Paper (Unspecified)
Additional Information (public): ISBN 978-92-899-3532-6; ISSN 1725-2806
Keywords: household finance, portfolio choice, background risk, HFCS, SCF
Classification Codes (e.g. JEL): D12, D14, D31, G11
Research Units: Labor Market and Social Policy
Status: Published
Date Deposited: 24 Apr 2019 12:46
Last Modified: 24 Apr 2019 12:46
URI: https://irihs.ihs.ac.at/id/eprint/5029

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