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Risk Aversion and Wealth: Evidence from Person-to-Person Lending Portfolios / Daniel Paravisini, Veronica Rappoport, Enrichetta Ravina.
- Format:
- Book
- Author/Creator:
- Paravisini, Daniel.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w16063.
- NBER working paper series no. w16063
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Risk Aversion and Wealth
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2010.
- Summary:
- We estimate risk aversion from the actual financial decisions of 2,168 investors in Lending Club (LC), a person-to-person lending platform. We develop a methodology that allows us to estimate risk aversion parameters from each portfolio choice. Since the same individual makes repeated investments, we are able to construct a panel of risk aversion parameters that we use to disentangle heterogeneity in attitudes towards risk from the elasticity of investor-specific risk aversion to changes in wealth. In the cross section, we find that wealthier investors are more risk averse. Using changes in house prices as a source of variation, we find that investors become more risk averse after a negative wealth shock. These preferences consistently extrapolate to other investor decisions within LC.
- Notes:
- Print version record
- June 2010.
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