We introduce a new meaure of risk appetite in financial markets, based on the cross sectional behavior of excess … returns. Turning them into probabilities through a Markov Switching model, we define one global risk appetite measure as the … cross-sectional average of the individual probabilities for each asset to be in a "risk appetite" regime. Given the …

theory suggests that with increasing labor income risk, the reluctance of households to hold stocks increases. We propose to … measure income risk as the observed variation of household income over a five year period. We find that indeed higher income … risk reduces the propensity to invest in stocks. However, when controlling for household heterogeneity as well as …

men. Once risk attitude is controlled for, this effect shrinks to only 2.6 percent. We find no difference when single … participation is mainly explained by different risk attitudes and monetary endowments, but women would participate even less in the … capital market if they reacted as sensitively to risk aversion as their male counterparts. Lastly, given participation in the …

The link between measures of risk and return within the equity market has been very weak over the past 47 years: In the … United States, returns on high-risk stocks have cumulatively fallen short of the returns on low-risk stocks, during a period … a risk anomaly — a mispricing of risk for behavioral and institutional reasons — and revisits the associated …

-established determinants of returns from the real world also affect asset prices in this market, despite the absence of systematic risk. The …

, investment in risky assets, investors' risk aversion, and endogeneity issue. The results imply that lack of financial literacy is …