The Center for Advanced Studies on the Foundations of Law and Finance invites you attend a seminar on
"Financial Risk-Tolerance During a Major Negative Life Experience: The Case of COVID-19 Pandemic"
Moran Ofir, Harry Radzyner Law School, Reichman University (IDC Herzliya)
to be held on Monday, 23 January 2023 at 02:15-03:30 PM (CET)
Online via Zoom
Meeting ID: 643 3237 2468
The paper examines the effect of an unprecedented, widespread, and life-threatening experience on risk-taking behavior focusing on the case of the COVID-19 pandemic. We conducted an online questionnaire of a diverse sample of subjects (total n = 658) based on Holt and Laury's (2002) risk-tolerance measure in 4 different time points - before the pandemic and during each of its first three waves. The data demonstrates that a major life experience significantly reduces financial risk-taking. While the objective financial situation seems to deteriorate as the crisis became more severe, the observed decrease in risk-tolerance was the most apparent in the 1st wave, with no major differences between the three waves of the pandemic. Moreover, we find no connection between the objective measure of financial risk and subjective tolerance towards risk during the pandemic. This finding suggests that changes to risk tolerance are highly affected by contextual and emotional considerations. Finally, we discuss our results in light of the risk seeking behavior of investors in commission-free online brokerage like Robinhood during COVID-19 and provide guidelines for policy implications.
You will find the updated paper on our website shortly.