Household willingness to take financial risk: Stockmarket movements and life-cycle effects

Using panel data on Australian households, the relationship between risk tolerance and past stock returns is investigated across economic and financial cycles, as well as over the life-cycle and across generations. Risk tolerance is found to be procyclical with stock returns over an eight year horizon. The empirical results also reveal an inverted J-curve age risk profile, and the presence of a longer cycle across genera-tions. Results are robust to controlling for financial crises, return volatility, real estate returns and home bias. (c) 2023 Elsevier B.V. All rights reserved.