Assuming a risk-neutral bank and assuming household utility to be exponential, we show how under information symmetry … the covariance of income and loan repayments may explain higher household borrowings than in the case without default … that in a situation in which a household without default option would neither borrow nor save, the existence of a default …

category. Background risk exerts a significant impact on household portfolios, resulting in a 'flight from risk', away from … households reduce their financial risk exposure when confronted with background risk. Our novel modelling approach - termed a … risk, and is unique in recovering for, any given risky asset class, the shares that are reallocated to a safer asset …

This paper examines households' self-insurance in financial markets when a rare personal disaster, such as disability … or long-term unemployment, may occur during working years. Personal disaster risk alters lifetime ex-ante investment … characterizes rare disasters, results in lower risk-taking at the beginning of working life, and is crucial in order to match the …

explainable by household characteristics as well as differences in risk aversion and a remainder. We employ the unexplained part …We use cross-country microdata to analyse the risk taking of households in Europe and the US. Concerning the extensive … inside Europe we document substantial differences. Furthermore, average risk aversion is strongly correlated with the share …

We develop a structural econometric model to elicit household-specific expectations about future financial asset … returns and risk attitudes by using data on observed portfolio holdings and self-assessed willingness to bear financial risk …. Our framework assumes that household portfolios are subject to short-selling constraints in stocks and bonds, and that …

We derive the conditions for the optimal portfolio choice within a constant relative risk aversion type of utility … asset returns. We illustrate the role — beyond risk aversion — played by higher-order moments in the optimal decision to … form a portfolio of risky assets. In particular, we show that higher-order risk attitudes such as prudence and temperance …

an increase in ambiguity is associated with increased investor activity. It also leads to a reduction in risk …

From standard portfolio-choice theory it is well-understood that background risk, overwhelmingly due to wage risk, is … one of the central determinants of individuals’ portfolio composition: higher background risk reduces risky investments …. However, if background risk is negatively correlated with financial market risk, higher background risk implies more risky …

take risk as measured by the general risk question. We demonstrate that this disposition, which we call risk conception, is … strongly associated with optimism, a stable facet of personality, and that it predicts real-life risk taking. The general risk … question captures this disposition alongside pure risk preference. This likely contributes to the predictive power of the …