Measuring Household Financial Risk

We use US panel data covering the period 1999-2009 to investigate the link between portfolio risk and household characteristics. We find wide heterogeneity of risk, with about 40 percent of the households willing to undertake no risk. We also find some regularities: whatever indicator we take, risk shows a flat age profile, and correlates with wealth and income. Alternative risk indicators provide similar insights, although they vary differently over time. In particular, the measure of implicit risk tolerance grew abnormally in 2009, i.e., at the beginning of the recent financial crisis