Working Paper: CEPR ID: DP15108
Authors: Marco Angrisani; Marco Cipriani; Antonio Guarino; Ryan Kendall; Julen Ortiz de Zarate Pina
Abstract: We study whether the COVID-19 pandemic has impacted risk preferences, comparing the results of experiments conducted before and during the outbreak. In each experiment, we elicit risk preferences from two sample groups: professional traders and undergraduate students. We find that, on average, risk preferences have remained constant for both pools of participants. Our results suggest that the increases in risk premia observed during the pandemic are not due to changes in risk appetite; rather, they are solely due to a change in beliefs by market participants. The findings of our paper support the traditional view that, at least on average, risk preferences are not affected by economic or social circumstances.
Keywords: risk aversion; financial markets; professional; covid19; experimental economics
JEL Codes: D81; D91; N0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Risk preferences (traders and students) remained constant (G40) | Changes in risk premia are attributed to shifts in beliefs (G40) |
| Risk preferences (traders) remained constant (G40) | Mean BRET choice for traders increased slightly (G11) |
| Risk preferences (students) remained constant (D11) | Mean BRET choice for students showed minimal change (D29) |
| Increases in risk premia observed during the pandemic (E44) | Not due to changes in risk appetite (G40) |
| Risk preferences remained constant (D11) | Stability of risk preferences is characteristic of individual behavior (D11) |