Measurement And Influencing Factors Of Implicit Risk Aversion For Residents

With the fast development of the capital market and the rapid growth of residents' private wealth,it is of great significance to examine the risk aversion of residents in the study of household making investment decisions,financial institutions designing and managing products,and policy makers launching related market regulations or benefits.This paper uses the micro survey data of household portfolio allocation to determine the level of risk aversion for residents in China,and then conducts an empirical analysis of its potential influencing factors.First,based on the theoretical basis of residents' risk aversion measures and the major research results of both domestic and foreign scholars in this field,this paper constructs a Pratt-Arrow measure of relative risk aversion coefficient for residents.Since this method is derived from the optimal portfolio and market expectation of residents,this paper defines this measure as implicit risk aversion for residents.Also,this paper selects main variables probably affecting the level of risk aversion of residents,and then designs regression models to research.After that,based on the residents' micro survey data as well as market data,this paper makes an empirical measurement of implicit risk aversion for Chinese residents through reasonable estimation of relevant parameters.The results show that the relative risk aversion coefficient of Chinese residents is roughly between 2-9 with a very obvious right-biased distribution.It implies that many residents did not participate in the investment of risky assets,and their implicit risk aversion coefficients are more than 20.Finally,this paper makes an empirical study on the influencing factors of residents' implicit risk aversion.The results show that:(1)Among the factors affecting the objective risk tolerance of residents,net wealth,human capital,gender,age,health status,health insurance,and financial background knowledge have a significant impact on residents' risk aversion level;(2)The implicit risk aversion of residents will increase with net wealth(including value of real estate),while it has a nonlinear U-shaped relationship with human capital,thus rejecting the hypothesis of constant relative risk aversion that commonly used as a key assumption in many financial economics models.(3)There is a significant relationship between the residents' implicit risk aversion and the scores of psychological quiz which reflects the subjective risk taking attitude of residents.The result shows that the subjective risk taking attitude of residents is to some extent consistent with this measured implicit risk aversion coefficient in China.