Wealth and Risk-Taking: A Cross-Country Study of European Households
Abstract: This study investigates the relationship between wealth and risk-taking among European households. Using data from 22 European countries, I show that households with more investable wealth are more likely to invest in risky assets and have a higher risky share conditional on participation. I also show that the elasticity of investable wealth with respect to the risky share is positive and that it increases slightly with investable wealth, which suggests that the share of investable wealth invested in risky assets is an increasing and convex function of investable wealth. Furthermore, I document the importance of considering commercial real estate as an investment vehicle when drawing conclusions on the risky share, as opposed to focusing strictly on financial assets. The results are indicative of decreasing relative risk aversion among European households.
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