Table 13and Table14present the coefficients of self-reported risk aversion when predict-ing current risky behaviors without and with socio-demographic controls, respectively.
Current risky behaviors are smoking, drinking, gambling, investment in risky assets, in-debtedness, employment status, self-employment, and public sector choice. Risk aversion is negatively correlated with all the given behaviors: risk-averse individuals smoke less, drink less, gamble less, invest less in risky assets, have less debt, and fewer of them are self-employed. Using the past lagged risk-aversion measures turns up fairly similar results when predicting current behaviors compared to the current risk-aversion measure.
Table 13: Analyses with Past Risk-Aversion Variables on Current Behaviors
Probit estimations without controls Self Public
Smoke Drink Gamble Risky asset Debt Employed employed sector RAt -0.080??? -0.065??? -0.071??? -0.043??? -0.032??? -0.079??? 0.003 0.016 Clustered SE (0.006) (0.007) (0.006) (0.008) (0.006) (0.006) (0.008) (0.011)
Pseudo R2 0.012 0.008 0.009 0.003 0.002 0.011 0.000 0.001
observations 23,847 23,847 23,847 8,597 23,047 22,975 14,210 11,033 RAt−1 -0.081??? -0.062??? -0.065??? -0.032??? -0.033??? -0.076??? 0.001 0.011 Clustered SE (0.007) (0.008) (0.007) (0.009) (0.007) (0.007) (0.010) (0.013)
Pseudo R2 0.012 0.007 0.008 0.002 0.002 0.011 0.000 0.000
observations 15,870 15,870 15,870 6,274 15,394 15,271 9,421 7,250
RAt−2 -0.086??? -0.061??? -0.067??? -0.016 -0.037??? -0.076??? 0.012 0.006 Clustered SE (0.009) (0.010) (0.009) (0.013) (0.009) (0.009) (0.013) (0.017)
Pseudo R2 0.013 0.007 0.008 0.000 0.002 0.010 0.000 0.000
observations 9,476 9,476 9,476 3,215 9,183 9,075 5,558 4,246
RAt−3 -0.078??? -0.053??? -0.062??? -0.018 -0.034??? -0.075??? 0.012 0.001 Clustered SE (0.010) (0.011) (0.010) (0.016) (0.010) (0.010) (0.014) (0.018)
Pseudo R2 0.011 0.006 0.007 0.001 0.002 0.011 0.000 0.000
observations 6,560 6,560 6,560 1,733 6,350 6,235 3,930 3,015
RAt−4 -0.085??? -0.062??? -0.057??? -0.011 -0.029? -0.056??? -0.000 0.012 Clustered SE (0.011) (0.013) (0.011) (0.015) (0.011) (0.012) (0.016) (0.020)
Pseudo R2 0.013 0.008 0.006 0.000 0.002 0.006 0.000 0.000
observations 3,962 3,962 3,962 1,738 3,840 3,732 2,418 1,874
RAt−5 -0.072??? -0.067??? -0.052?? -0.016 -0.019 -0.031 -0.026 -0.001 Clustered SE (0.016) (0.018) (0.017) (0.018) (0.016) (0.017) (0.024) (0.030)
Pseudo R2 0.009 0.009 0.005 0.000 0.001 0.002 0.001 0.000
observations 1,576 1,576 1,576 1,198 1,536 1,494 930 722
Notes: ?10%,??5% and???1% significance.
Similarly, Tables15and16present the coefficients of the different average measures of
Table 14: Analyses with Past Risk-Aversion Variables on Current Behaviors
Probit estimations with controls Self Public
Smoke Drink Gamble Risky asset Debt Employed employed sector RAt -0.034??? -0.041??? -0.055??? -0.041??? -0.017? -0.042??? -0.009 0.017 Clustered SE (0.007) (0.008) (0.007) (0.009) (0.007) (0.007) (0.010) (0.013)
Pseudo R2 0.195 0.082 0.046 0.068 0.092 0.177 0.075 0.047
observations 17,436 17,436 17,436 6,622 17,139 16,829 10,170 7,688 RAt−1 -0.031??? -0.038??? -0.044??? -0.036??? -0.016 -0.033??? -0.016 0.015 Clustered SE (0.009) (0.009) (0.008) (0.010) (0.008) (0.009) (0.012) (0.016)
Pseudo R2 0.217 0.082 0.047 0.068 0.101 0.172 0.076 0.044
observations 11,862 11,862 11,862 4,885 11,682 11,436 6,872 5,147 RAt−2 -0.030?? -0.037?? -0.053??? -0.010 -0.022? -0.037??? -0.007 0.010 Clustered SE (0.012) (0.012) (0.010) (0.015) (0.011) (0.011) (0.015) (0.020)
Pseudo R2 0.257 0.079 0.047 0.065 0.107 0.164 0.070 0.044
observations 7,192 7,192 7,192 2,576 7,075 6,906 4,126 3,068
RAt−3 -0.024 -0.032? -0.046??? -0.021 -0.021 -0.036?? -0.013 0.007 Clustered SE (0.013) (0.013) (0.011) (0.018) (0.012) (0.012) (0.017) (0.022)
Pseudo R2 0.260 0.081 0.050 0.063 0.115 0.155 0.066 0.048
observations 5,019 5,019 5,019 1,393 4,930 4,775 2,949 2,213
RAt−4 -0.037?? -0.040?? -0.043?? -0.003 -0.015 -0.019 -0.023 0.022 Clustered SE (0.014) (0.015) (0.013) (0.018) (0.014) (0.015) (0.019) (0.024)
Pseudo R2 0.269 0.084 0.063 0.062 0.117 0.170 0.064 0.053
observations 3,050 3,050 3,050 1,397 2,995 2,871 1,845 1,402
RAt−5 -0.048? -0.055?? -0.026 -0.006 -0.026 -0.026 -0.066? -0.014 Clustered SE (0.020) (0.021) (0.020) (0.021) (0.019) (0.021) (0.028) (0.034)
Pseudo R2 0.261 0.101 0.103 0.062 0.114 0.167 0.081 0.064
observations 1,237 1,237 1,237 978 1,217 1,172 730 555
Notes: ?10%,??5% and???1% significance.
Control variables are gender, age, education, mother’s education, marital status and number of children.
risk aversion when predicting current risky behaviors.21 The first two rows of each table present the total average risk-aversion measures: the first is panel average risk aversion over time including the current risk aversion measure, while the second excludes current risk aversion. From the third row, we calculate the average of current risk aversion at t and the past risk-aversion measure at t−i where i= 1,2,3,4,5,6.
Tables 17- Table 22show the results for the sample of individuals who appear four, five and six consecutive years. A comparison of the pseudo R2 and coefficient size shows that a four-year average provides a better prediction than the other two-year averages of risk aversion. This suggests that having more information on the time-variant dimensions of the risk-aversion measure can increase explanatory power and decrease measurement noise. In addition, current behavior is more related to the recent risk-aversion measures,
21We dropped years 2003 and 2004 in this section due to the abovementioned measurement concerns
Table 15: Analyses with Average Risk-Aversion Variables on Current Behaviors
Probit estimations without controls Self Public
Smoke Drink Gamble Risky asset Debt Employed employed sector RAPni=0RAt−i
(i+1)
-0.099??? -0.082??? -0.086??? -0.047??? -0.039??? -0.095??? 0.005 0.026 Clustered SE (0.008) (0.008) (0.007) (0.009) (0.007) (0.007) (0.011) (0.014)
Pseudo R2 0.015 0.011 0.011 0.003 0.002 0.013 0.000 0.001
observations 23,847 23,847 23,847 8,597 23,047 22,975 14,210 11,033
RAPni=1RAt−i (i+1)
-0.056??? -0.038??? -0.034??? -0.029??? -0.008 -0.043??? -0.002 0.011 Clustered SE (0.004) (0.004) (0.004) (0.005) (0.004) (0.004) (0.006) (0.007)
Pseudo R2 0.016 0.008 0.006 0.005 0.000 0.010 0.000 0.001
observations 15,712 15,712 15,712 6,247 15,263 15,126 9,343 7,201
RAt,t−1
2 -0.111??? -0.084??? -0.093??? -0.052??? -0.045??? -0.106??? 0.001 0.010 Clustered SE (0.009) (0.010) (0.009) (0.010) (0.009) (0.009) (0.013) (0.017)
Pseudo R2 0.016 0.010 0.012 0.004 0.003 0.015 0.000 0.000
observations 15,712 15,712 15,712 6,247 15,263 15,126 9,343 7,201
RAt,t−2
2 -0.121??? -0.076??? -0.091??? -0.032? -0.049??? -0.109??? 0.014 0.001 Clustered SE (0.012) (0.013) (0.011) (0.015) (0.012) (0.012) (0.017) (0.022)
Pseudo R2 0.019 0.008 0.011 0.001 0.003 0.015 0.000 0.000
observations 9,367 9,367 9,367 3,198 9,093 8,974 5,500 4,209
RAt,t−3
2
-0.113??? -0.073??? -0.079??? -0.028 -0.047??? -0.107??? 0.015 -0.007 Clustered SE (0.013) (0.014) (0.012) (0.018) (0.013) (0.013) (0.018) (0.023)
Pseudo R2 0.016 0.007 0.008 0.001 0.003 0.015 0.000 0.000
observations 6,478 6,478 6,478 1,725 6,282 6,158 3,884 2,985
RAt,t−4
2
-0.123??? -0.079??? -0.075??? -0.021 -0.040?? -0.091??? -0.001 0.001 Clustered SE (0.015) (0.016) (0.014) (0.018) (0.015) (0.015) (0.020) (0.026)
Pseudo R2 0.019 0.008 0.007 0.001 0.002 0.010 0.000 0.000
observations 3,912 3,912 3,912 1,730 3,799 3,686 2,390 1,854
RAt,t−5
2
-0.105??? -0.091??? -0.075??? -0.038 -0.039? -0.066?? -0.012 -0.018 Clustered SE (0.020) (0.022) (0.020) (0.022) (0.020) (0.020) (0.028) (0.036)
Pseudo R2 0.014 0.011 0.007 0.002 0.002 0.005 0.000 0.000
observations 1,556 1,556 1,556 1,193 1,518 1,476 919 714
Notes: ?10%,??5% and???1% significance.
since risk aversion measured two years previously can still predict current behavior well.
For this reason, collecting risk aversion every two years would definitely raise the quality of the use of the risk-aversion measure in surveys. Alternatively, collecting the risk aversion measure at least every two years provides for a valid analysis, as past risk aversion at t−2 predicts current behavior well.
Table 16: Analyses with Average Risk-Aversion Variables on Current Behaviors
Probit estimations with controls Self Public
Smoke Drink Gamble Risky asset Debt Employed employed sector RAPni=0RAt−i
(i+1)
-0.041??? -0.052??? -0.065??? -0.046??? -0.017 -0.045??? -0.013 0.031 Clustered SE (0.009) (0.010) (0.009) (0.011) (0.009) (0.009) (0.013) (0.016)
Pseudo R2 0.195 0.083 0.046 0.068 0.092 0.177 0.075 0.047
observations 17,436 17,436 17,436 6,622 17,139 16,829 10,170 7,688 RAPni=1RAt−i
(i+1)
-0.036??? -0.029??? -0.024??? -0.025??? -0.007 -0.031??? -0.002 0.014 Clustered SE (0.005) (0.005) (0.005) (0.006) (0.005) (0.005) (0.007) (0.009)
Pseudo R2 0.220 0.083 0.046 0.069 0.101 0.175 0.075 0.046
observations 11,776 11,776 11,776 4,867 11,603 11,356 6,825 5,120
RAt,t−1
2 -0.044??? -0.056??? -0.069??? -0.055??? -0.025? -0.053??? -0.019 0.012 Clustered SE (0.011) (0.012) (0.011) (0.012) (0.011) (0.011) (0.015) (0.020)
Pseudo R2 0.217 0.082 0.049 0.070 0.101 0.173 0.076 0.045
observations 11,776 11,776 11,776 4,867 11,603 11,356 6,825 5,120
RAt,t−2
2
-0.050??? -0.047?? -0.074??? -0.027 -0.030? -0.059??? -0.008 0.003 Clustered SE (0.015) (0.016) (0.013) (0.018) (0.014) (0.014) (0.019) (0.026)
Pseudo R2 0.257 0.078 0.049 0.066 0.108 0.166 0.070 0.043
observations 7,131 7,131 7,131 2,566 7,022 6,849 4,093 3,049
RAt,t−3
2
-0.043?? -0.046?? -0.059??? -0.033 -0.033? -0.061??? -0.013 -0.006 Clustered SE (0.016) (0.017) (0.014) (0.022) (0.016) (0.016) (0.021) (0.028)
Pseudo R2 0.261 0.081 0.050 0.064 0.116 0.157 0.065 0.048
observations 4,972 4,972 4,972 1,390 4,891 4,731 2,922 2,199
RAt,t−4
2 -0.054?? -0.049?? -0.051?? -0.017 -0.025 -0.048?? -0.029 0.008 Clustered SE (0.018) (0.019) (0.017) (0.022) (0.018) (0.018) (0.024) (0.031)
Pseudo R2 0.269 0.083 0.063 0.063 0.117 0.170 0.061 0.052
observations 3,021 3,021 3,021 1,394 2,974 2,845 1,829 1,392
RAt,t−5
2
-0.050? -0.063? -0.033 -0.028 -0.036 -0.048 -0.041 -0.045 Clustered SE (0.025) (0.026) (0.024) (0.026) (0.024) (0.025) (0.033) (0.040)
Pseudo R2 0.258 0.102 0.102 0.063 0.115 0.169 0.074 0.066
observations 1,228 1,228 1,228 977 1,209 1,164 725 551
Notes: ? 10%,??5% and???1% significance.
Control variables are gender, age, education, mother’s education, marital status and number of children.
Table 17: Analyses with Average Risk-Aversion Variables on Current Behaviors - Re-stricted Sample - 4 years
Probit estimations without controls Self Public
Smoke Drink Gamble Risky asset Debt Employed employed sector RAt -0.086??? -0.052??? -0.055??? -0.024 -0.036?? -0.083??? 0.007 -0.010 Clustered SE (0.011) (0.012) (0.011) (0.017) (0.011) (0.011) (0.015) (0.020)
Pseudo R2 0.012 0.005 0.005 0.001 0.002 0.011 0.000 0.000
observations 6,384 6,384 6,384 1,706 6,194 6,072 3,832 2,950
RAt−1 -0.089??? -0.051??? -0.063??? -0.017 -0.035?? -0.080??? 0.001 0.001 Clustered SE (0.011) (0.012) (0.010) (0.016) (0.011) (0.011) (0.015) (0.020)
Pseudo R2 0.013 0.005 0.007 0.000 0.002 0.011 0.000 0.000
observations 6,384 6,384 6,384 1,706 6,194 6,072 3,832 2,950
RAt−2 -0.087??? -0.071??? -0.074??? -0.014 -0.038??? -0.075??? 0.011 0.009 Clustered SE (0.011) (0.012) (0.010) (0.017) (0.011) (0.011) (0.015) (0.020)
Pseudo R2 0.013 0.009 0.010 0.000 0.003 0.010 0.000 0.000
observations 6,384 6,384 6,384 1,706 6,194 6,072 3,832 2,950
RAt−3 -0.080??? -0.052??? -0.063??? -0.016 -0.033?? -0.074??? 0.015 0.003 Clustered SE (0.010) (0.011) (0.010) (0.016) (0.010) (0.010) (0.014) (0.019)
Pseudo R2 0.012 0.005 0.008 0.000 0.002 0.010 0.000 0.000
observations 6,384 6,384 6,384 1,706 6,194 6,072 3,832 2,950
RAt,t−1
2 -0.116??? -0.068??? -0.079??? -0.026 -0.047??? -0.108??? 0.006 -0.006 Clustered SE (0.014) (0.015) (0.013) (0.019) (0.014) (0.014) (0.019) (0.025)
Pseudo R2 0.016 0.006 0.008 0.001 0.003 0.014 0.000 0.000
observations 6,384 6,384 6,384 1,706 6,194 6,072 3,832 2,950
RAt,t−2
2
-0.117??? -0.083??? -0.087??? -0.025 -0.050??? -0.107??? 0.012 -0.001 Clustered SE (0.014) (0.015) (0.013) (0.019) (0.013) (0.013) (0.019) (0.025)
Pseudo R2 0.017 0.009 0.010 0.001 0.003 0.014 0.000 0.000
observations 6,384 6,384 6,384 1,706 6,194 6,072 3,832 2,950
RAt,t−3
2 -0.114??? -0.071??? -0.081??? -0.026 -0.047??? -0.107??? 0.016 -0.004 Clustered SE (0.013) (0.014) (0.013) (0.018) (0.013) (0.013) (0.018) (0.024)
Pseudo R2 0.016 0.007 0.008 0.001 0.003 0.014 0.000 0.000
observations 6,384 6,384 6,384 1,706 6,194 6,072 3,832 2,950
RAt,t−1,t−2,t−3
4 -0.145??? -0.096??? -0.107??? -0.027 -0.056??? -0.126??? 0.012 0.006 Clustered SE (0.017) (0.018) (0.015) (0.021) (0.016) (0.016) (0.022) (0.029)
Pseudo R2 0.021 0.010 0.012 0.001 0.003 0.016 0.000 0.000
observations 6,384 6,384 6,384 1,706 6,194 6,072 3,832 2,950
Notes: ?10%,??5% and???1% significance.
Table 18: Analyses with Average Risk-Aversion Variables on Current Behaviors - Re-stricted Sample - 4 years
Probit estimations with controls Self Public
Smoke Drink Gamble Risky asset Debt Employed employed sector RAt -0.038?? -0.037? -0.041??? -0.028 -0.029? -0.056??? -0.009 -0.015 Clustered SE (0.014) (0.014) (0.012) (0.020) (0.013) (0.013) (0.017) (0.023)
Pseudo R2 0.260 0.081 0.050 0.065 0.117 0.156 0.066 0.049
observations 4,902 4,902 4,902 1,376 4,823 4,665 2,883 2,172
RAt−1 -0.041?? -0.021 -0.049??? -0.022 -0.026? -0.044??? -0.020 0.006 Clustered SE (0.013) (0.014) (0.012) (0.019) (0.013) (0.013) (0.018) (0.025)
Pseudo R2 0.260 0.080 0.051 0.065 0.117 0.155 0.067 0.049
observations 4,902 4,902 4,902 1,376 4,823 4,665 2,883 2,172
RAt−2 -0.029? -0.045??? -0.060??? -0.016 -0.024 -0.042?? -0.008 0.015 Clustered SE (0.013) (0.014) (0.012) (0.019) (0.013) (0.013) (0.017) (0.025)
Pseudo R2 0.259 0.082 0.053 0.064 0.116 0.155 0.066 0.049
observations 4,902 4,902 4,902 1,376 4,823 4,665 2,883 2,172
RAt−3 -0.029? -0.031? -0.048??? -0.022 -0.020 -0.036?? -0.009 0.010 Clustered SE (0.013) (0.013) (0.011) (0.018) (0.012) (0.012) (0.017) (0.022)
Pseudo R2 0.259 0.081 0.051 0.065 0.116 0.154 0.066 0.049
observations 4,902 4,902 4,902 1,376 4,823 4,665 2,883 2,172
RAt,t−1
2 -0.053?? -0.038? -0.060??? -0.032 -0.037? -0.066??? -0.019 -0.005 Clustered SE (0.017) (0.018) (0.015) (0.022) (0.016) (0.017) (0.022) (0.030)
Pseudo R2 0.261 0.081 0.051 0.065 0.117 0.157 0.066 0.049
observations 4,902 4,902 4,902 1,376 4,823 4,665 2,883 2,172
RAt,t−2
2 -0.045?? -0.056?? -0.069??? -0.030 -0.036? -0.065??? -0.011 0.001 Clustered SE (0.017) (0.018) (0.015) (0.022) (0.016) (0.016) (0.022) (0.029)
Pseudo R2 0.260 0.082 0.052 0.065 0.117 0.156 0.066 0.049
observations 4,902 4,902 4,902 1,376 4,823 4,665 2,883 2,172
RAt,t−3
2 -0.045?? -0.046?? -0.062??? -0.033 -0.033? -0.062??? -0.012 -0.002 Clustered SE (0.016) (0.017) (0.015) (0.022) (0.016) (0.016) (0.021) (0.028)
Pseudo R2 0.260 0.081 0.052 0.065 0.117 0.156 0.066 0.049
observations 4,902 4,902 4,902 1,376 4,823 4,665 2,883 2,172
RAt,t−1,t−2,t−3
4 -0.062?? -0.059?? -0.084??? -0.032 -0.038? -0.070??? -0.023 0.014 Clustered SE (0.020) (0.021) (0.018) (0.025) (0.019) (0.019) (0.026) (0.034)
Pseudo R2 0.261 0.082 0.054 0.065 0.117 0.156 0.066 0.049
observations 4,902 4,902 4,902 1,376 4,823 4,665 2,883 2,172
Notes: ?10%,??5% and???1% significance.
Control variables are gender, age, education, mother’s education, marital status and number of children.
Table 19: Analyses with Average Risk-Aversion Variables on Current Behaviors - Re-stricted Sample - 5 years
Probit estimations without controls Self Public
Smoke Drink Gamble Risky asset Debt Employed employed sector RAt -0.091??? -0.055??? -0.051??? -0.023 -0.033? -0.077??? -0.002 -0.015 Clustered SE (0.013) (0.014) (0.013) (0.017) (0.013) (0.013) (0.018) (0.024)
Pseudo R2 0.013 0.005 0.004 0.001 0.002 0.009 0.000 0.000
observations 3,825 3,825 3,825 1,702 3,720 3,609 2,348 1,822
RAt−1 -0.080??? -0.051??? -0.049??? -0.017 -0.038?? -0.075??? 0.005 -0.001 Clustered SE (0.013) (0.014) (0.012) (0.016) (0.013) (0.013) (0.018) (0.025)
Pseudo R2 0.010 0.004 0.004 0.000 0.002 0.009 0.000 0.000
observations 3,825 3,825 3,825 1,702 3,720 3,609 2,348 1,822
RAt−2 -0.098??? -0.070??? -0.080??? -0.014 -0.035?? -0.064??? 0.010 0.013 Clustered SE (0.013) (0.013) (0.012) (0.017) (0.013) (0.013) (0.018) (0.023)
Pseudo R2 0.016 0.008 0.011 0.000 0.002 0.007 0.000 0.000
observations 3,825 3,825 3,825 1,702 3,720 3,609 2,348 1,822
RAt−3 -0.084??? -0.062??? -0.072??? -0.016 -0.043??? -0.073??? 0.017 -0.003 Clustered SE (0.012) (0.013) (0.012) (0.016) (0.012) (0.013) (0.018) (0.024)
Pseudo R2 0.013 0.007 0.010 0.000 0.003 0.010 0.001 0.000
observations 3,825 3,825 3,825 1,702 3,720 3,609 2,348 1,822
RAt−4 -0.088??? -0.061??? -0.056??? -0.009 -0.027? -0.054??? 0.004 0.013 Clustered SE (0.012) (0.013) (0.011) (0.015) (0.012) (0.012) (0.016) (0.020)
Pseudo R2 0.014 0.007 0.006 0.000 0.001 0.006 0.000 0.000
observations 3,825 3,825 3,825 1,702 3,720 3,609 2,348 1,822
RAt,t−1
2 -0.113??? -0.070??? -0.066??? -0.026 -0.046?? -0.100??? 0.001 -0.011 Clustered SE (0.016) (0.017) (0.015) (0.019) (0.016) (0.016) (0.022) (0.029)
Pseudo R2 0.015 0.006 0.005 0.001 0.003 0.012 0.000 0.000
observations 3,825 3,825 3,825 1,702 3,720 3,609 2,348 1,822
RAt,t−2
2 -0.127??? -0.084??? -0.088??? -0.024 -0.045?? -0.095??? 0.005 -0.002 Clustered SE (0.015) (0.016) (0.015) (0.019) (0.015) (0.016) (0.021) (0.028)
Pseudo R2 0.019 0.009 0.010 0.001 0.003 0.011 0.000 0.000
observations 3,825 3,825 3,825 1,702 3,720 3,609 2,348 1,822
RAt,t−3
2
-0.119??? -0.079??? -0.084??? -0.025 -0.051??? -0.101??? 0.011 -0.012 Clustered SE (0.015) (0.016) (0.015) (0.019) (0.015) (0.015) (0.021) (0.029)
Pseudo R2 0.017 0.008 0.009 0.001 0.003 0.013 0.000 0.000
observations 3,825 3,825 3,825 1,702 3,720 3,609 2,348 1,822
RAt,t−4
2 -0.124??? -0.080??? -0.074??? -0.021 -0.041?? -0.090??? 0.001 0.000 Clustered SE (0.015) (0.016) (0.014) (0.018) (0.015) (0.015) (0.021) (0.026)
Pseudo R2 0.019 0.008 0.007 0.001 0.002 0.010 0.000 0.000
observations 3,825 3,825 3,825 1,702 3,720 3,609 2,348 1,822
RAt,t−1,t−2,t−3,t−4
5 -0.153??? -0.105??? -0.106??? -0.027 -0.058?? -0.115??? 0.008 0.005 Clustered SE (0.018) (0.019) (0.017) (0.021) (0.018) (0.018) (0.025) (0.033)
Pseudo R2 0.023 0.011 0.011 0.001 0.003 0.013 0.000 0.000
observations 3,825 3,825 3,825 1,702 3,720 3,609 2,348 1,822
Notes: ?10%,??5% and???1% significance.
Table 20: Analyses with Average Risk-Aversion Variables on Current Behaviors - Re-stricted Sample - 5 years
Probit estimations with controls Self Public
Smoke Drink Gamble Risky asset Debt Employed employed sector RAt -0.041? -0.036? -0.030? -0.026 -0.026 -0.054??? -0.019 -0.016 Clustered SE (0.016) (0.017) (0.015) (0.020) (0.015) (0.016) (0.021) (0.027)
Pseudo R2 0.265 0.084 0.061 0.065 0.120 0.167 0.063 0.055
observations 2,954 2,954 2,954 1,372 2,910 2,784 1,794 1,365
RAt−1 -0.029 -0.030 -0.031? -0.022 -0.039?? -0.049?? -0.024 -0.007 Clustered SE (0.016) (0.016) (0.014) (0.019) (0.015) (0.016) (0.021) (0.029)
Pseudo R2 0.264 0.084 0.061 0.065 0.121 0.167 0.063 0.055
observations 2,954 2,954 2,954 1,372 2,910 2,784 1,794 1,365
RAt−2 -0.041? -0.035? -0.065??? -0.017 -0.021 -0.031 -0.014 0.021
Clustered SE (0.016) (0.016) (0.015) (0.019) (0.015) (0.016) (0.020) (0.029)
Pseudo R2 0.265 0.084 0.066 0.064 0.120 0.165 0.062 0.055
observations 2,954 2,954 2,954 1,372 2,910 2,784 1,794 1,365
RAt−3 -0.027 -0.041?? -0.050??? -0.023 -0.028 -0.037? -0.013 0.001 Clustered SE (0.015) (0.016) (0.014) (0.018) (0.015) (0.016) (0.021) (0.030)
Pseudo R2 0.264 0.085 0.063 0.065 0.120 0.166 0.062 0.054
observations 2,954 2,954 2,954 1,372 2,910 2,784 1,794 1,365
RAt−4 -0.044?? -0.041?? -0.045??? -0.003 -0.014 -0.022 -0.020 0.025 Clustered SE (0.014) (0.015) (0.014) (0.018) (0.014) (0.015) (0.019) (0.024)
Pseudo R2 0.266 0.085 0.063 0.064 0.119 0.164 0.063 0.056
observations 2,954 2,954 2,954 1,372 2,910 2,784 1,794 1,365
RAt,t−1
2 -0.047? -0.044? -0.040? -0.031 -0.043? -0.068??? -0.029 -0.015 Clustered SE (0.020) (0.020) (0.018) (0.022) (0.019) (0.020) (0.026) (0.034)
Pseudo R2 0.265 0.084 0.061 0.065 0.121 0.168 0.063 0.055
observations 2,954 2,954 2,954 1,372 2,910 2,784 1,794 1,365
RAt,t−2
2
-0.055?? -0.048? -0.064??? -0.029 -0.032 -0.057?? -0.022 0.004 Clustered SE (0.019) (0.020) (0.017) (0.022) (0.018) (0.019) (0.025) (0.033)
Pseudo R2 0.266 0.085 0.064 0.065 0.120 0.167 0.063 0.055
observations 2,954 2,954 2,954 1,372 2,910 2,784 1,794 1,365
RAt,t−3
2 -0.046? -0.053?? -0.055?? -0.032 -0.037? -0.061?? -0.022 -0.010 Clustered SE (0.019) (0.020) (0.017) (0.022) (0.018) (0.019) (0.025) (0.035)
Pseudo R2 0.265 0.085 0.063 0.065 0.121 0.167 0.063 0.055
observations 2,954 2,954 2,954 1,372 2,910 2,784 1,794 1,365
RAt,t−4
2
-0.059?? -0.053?? -0.052?? -0.019 -0.026 -0.051?? -0.027 0.008 Clustered SE (0.019) (0.019) (0.017) (0.022) (0.018) (0.019) (0.024) (0.031)
Pseudo R2 0.266 0.085 0.063 0.064 0.120 0.166 0.063 0.055
observations 2,954 2,954 2,954 1,372 2,910 2,784 1,794 1,365
RAt,t−1,t−2,t−3,t−4
5 -0.066?? -0.067?? -0.075??? -0.031 -0.043? -0.064?? -0.037 0.012 Clustered SE (0.022) (0.023) (0.020) (0.025) (0.022) (0.023) (0.030) (0.039)
Pseudo R2 0.266 0.086 0.065 0.065 0.121 0.167 0.063 0.055
observations 2,954 2,954 2,954 1,372 2,910 2,784 1,794 1,365
Notes: ?10%,??5% and???1% significance.
Control variables are gender, age, education, mother’s education, marital status and number of children.
Table 21: Analyses with Average Risk-Aversion Variables on Current Behaviors - Re-stricted Sample - 6 years
Probit estimations without controls Self Public
Smoke Drink Gamble Risky asset Debt Employed employed sector RAt -0.082??? -0.065??? -0.057?? -0.039 -0.044? -0.065??? 0.011 -0.021 Clustered SE (0.018) (0.019) (0.019) (0.020) (0.018) (0.018) (0.025) (0.035)
Pseudo R2 0.010 0.007 0.005 0.002 0.003 0.007 0.000 0.001
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt−1 -0.071??? -0.051?? -0.049?? -0.004 -0.035? -0.059?? -0.009 0.001 Clustered SE (0.017) (0.019) (0.018) (0.020) (0.018) (0.018) (0.026) (0.035)
Pseudo R2 0.008 0.004 0.004 0.000 0.002 0.006 0.000 0.000
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt−2 -0.098??? -0.093??? -0.076??? -0.008 -0.035 -0.074??? -0.002 -0.021 Clustered SE (0.018) (0.020) (0.019) (0.020) (0.018) (0.019) (0.027) (0.037)
Pseudo R2 0.014 0.013 0.009 0.000 0.002 0.008 0.000 0.001
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt−3 -0.088??? -0.061??? -0.096??? -0.019 -0.052?? -0.052?? 0.021 -0.008 Clustered SE (0.017) (0.018) (0.018) (0.019) (0.017) (0.018) (0.026) (0.034)
Pseudo R2 0.013 0.007 0.016 0.001 0.005 0.005 0.001 0.000
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt−4 -0.089??? -0.089??? -0.073??? -0.015 -0.040? -0.073??? 0.018 -0.014 Clustered SE (0.017) (0.019) (0.018) (0.019) (0.017) (0.018) (0.025) (0.036)
Pseudo R2 0.014 0.014 0.009 0.000 0.003 0.009 0.001 0.000
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt−5 -0.076??? -0.070??? -0.055?? -0.018 -0.024 -0.032 -0.021 0.005 Clustered SE (0.016) (0.018) (0.017) (0.019) (0.017) (0.017) (0.024) (0.031)
Pseudo R2 0.010 0.009 0.006 0.001 0.001 0.002 0.001 0.000
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt,t−1
2 -0.099??? -0.075??? -0.069?? -0.027 -0.051? -0.081??? 0.002 -0.013 Clustered SE (0.020) (0.022) (0.021) (0.023) (0.020) (0.021) (0.029) (0.039)
Pseudo R2 0.012 0.007 0.006 0.001 0.003 0.008 0.000 0.000
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt,t−2
2 -0.119??? -0.105??? -0.088??? -0.031 -0.052? -0.092??? 0.007 -0.027 Clustered SE (0.021) (0.023) (0.022) (0.023) (0.021) (0.021) (0.029) (0.041)
Pseudo R2 0.016 0.013 0.009 0.001 0.003 0.010 0.000 0.001
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt,t−3
2 -0.111??? -0.083??? -0.102??? -0.037 -0.063?? -0.077??? 0.021 -0.019 Clustered SE (0.020) (0.022) (0.021) (0.022) (0.020) (0.021) (0.029) (0.039)
Pseudo R2 0.015 0.009 0.013 0.002 0.005 0.007 0.001 0.000
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt,t−4
2 -0.116??? -0.105??? -0.088??? -0.035 -0.056?? -0.094??? 0.020 -0.023 Clustered SE (0.020) (0.022) (0.021) (0.023) (0.020) (0.021) (0.029) (0.042)
Pseudo R2 0.016 0.014 0.010 0.002 0.004 0.011 0.001 0.001
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt,t−5
2 -0.110??? -0.094??? -0.078??? -0.038 -0.046? -0.066?? -0.008 -0.011 Clustered SE (0.020) (0.022) (0.021) (0.023) (0.020) (0.021) (0.029) (0.037)
Pseudo R2 0.015 0.011 0.008 0.002 0.003 0.005 0.000 0.000
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
RAt,t−1,t−2,t−3,t−4,t−5
6 -0.147??? -0.126??? -0.119??? -0.029 -0.066?? -0.103??? 0.005 -0.016 Clustered SE (0.023) (0.025) (0.024) (0.026) (0.023) (0.024) (0.033) (0.044)
Pseudo R2 0.020 0.015 0.014 0.001 0.004 0.010 0.000 0.000
observations 1,506 1,506 1,506 1,166 1,472 1,430 894 692
Notes: ?10%,??5% and???1% significance.
Table 22: Analyses with Average Risk-Aversion Variables on Current Behaviors - Re-stricted Sample - 6 years
Probit estimations with controls Self Public
Smoke Drink Gamble Risky asset Debt Employed employed sector
RAt -0.028 -0.033 -0.022 -0.037 -0.033 -0.047? 0.013 -0.049
Clustered SE (0.023) (0.023) (0.022) (0.024) (0.021) (0.023) (0.030) (0.039)
Pseudo R2 0.252 0.102 0.100 0.066 0.117 0.160 0.072 0.076
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt−1 -0.028 -0.016 -0.015 0.004 -0.048? -0.040 -0.049 -0.013
Clustered SE (0.022) (0.022) (0.022) (0.023) (0.021) (0.022) (0.030) (0.042)
Pseudo R2 0.252 0.100 0.100 0.064 0.119 0.159 0.076 0.072
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt−2 -0.039 -0.062?? -0.064?? -0.001 -0.045? -0.067?? -0.057 -0.035 Clustered SE (0.023) (0.023) (0.023) (0.023) (0.022) (0.023) (0.031) (0.044)
Pseudo R2 0.253 0.105 0.105 0.064 0.119 0.163 0.076 0.074
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt−3 -0.031 -0.026 -0.064?? -0.009 -0.047? -0.019 -0.012 -0.017
Clustered SE (0.021) (0.022) (0.021) (0.022) (0.020) (0.021) (0.029) (0.043)
Pseudo R2 0.252 0.101 0.105 0.065 0.119 0.158 0.072 0.072
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt−4 -0.042 -0.056? -0.049? 0.008 -0.045? -0.051? -0.016 -0.023
Clustered SE (0.021) (0.022) (0.021) (0.022) (0.021) (0.021) (0.030) (0.044)
Pseudo R2 0.253 0.105 0.103 0.065 0.119 0.161 0.072 0.073
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt−5 -0.053?? -0.053? -0.023 -0.008 -0.032 -0.027 -0.060? -0.006
Clustered SE (0.020) (0.021) (0.020) (0.021) (0.020) (0.021) (0.028) (0.036)
Pseudo R2 0.255 0.105 0.100 0.065 0.118 0.158 0.078 0.072
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt,t−1
2 -0.037 -0.031 -0.024 -0.020 -0.053? -0.057? -0.025 -0.040
Clustered SE (0.025) (0.026) (0.025) (0.026) (0.024) (0.026) (0.034) (0.044)
Pseudo R2 0.252 0.101 0.100 0.065 0.119 0.160 0.073 0.074
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt,t−2
2 -0.045 -0.064? -0.057? -0.025 -0.053? -0.077?? -0.027 -0.055
Clustered SE (0.026) (0.027) (0.026) (0.027) (0.025) (0.027) (0.035) (0.046)
Pseudo R2 0.253 0.104 0.103 0.065 0.119 0.163 0.073 0.075
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt,t−3
2 -0.040 -0.039 -0.059? -0.029 -0.054? -0.044 -0.000 -0.044
Clustered SE (0.025) (0.026) (0.025) (0.027) (0.024) (0.026) (0.034) (0.046)
Pseudo R2 0.253 0.102 0.103 0.065 0.119 0.159 0.072 0.074
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt,t−4
2 -0.048 -0.061? -0.049 -0.018 -0.053? -0.067?? -0.003 -0.047
Clustered SE (0.026) (0.027) (0.025) (0.027) (0.025) (0.026) (0.034) (0.048)
Pseudo R2 0.253 0.104 0.102 0.065 0.119 0.162 0.072 0.075
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt,t−5
2 -0.057? -0.062? -0.031 -0.029 -0.045 -0.051? -0.037 -0.036
Clustered SE (0.025) (0.026) (0.025) (0.026) (0.024) (0.026) (0.034) (0.042)
Pseudo R2 0.254 0.104 0.100 0.065 0.118 0.160 0.074 0.073
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
RAt,t−1,t−2,t−3,t−4,t−5 6
-0.066? -0.074? -0.070? -0.012 -0.074?? -0.074? -0.056 -0.041 Clustered SE (0.028) (0.030) (0.029) (0.030) (0.028) (0.029) (0.040) (0.053)
Pseudo R2 0.254 0.105 0.103 0.065 0.120 0.161 0.075 0.073
observations 1,191 1,191 1,191 953 1,174 1,129 703 532
Notes: ?10%,??5% and???1% significance.
Control variables are gender, age, education, mother’s education, marital status and number of children.
5 Conclusion
This paper asks questions about risk-aversion stability over time. Surveys often take for granted that risk aversion is innate and time-invariant, resulting in a single measure of individual preference toward risk. We ask whether risk aversion collected just once can really be a valid measure. In order to test this hypothesis, we first find evidence of risk-aversion variance on a yearly basis using the Osaka panel, where self-reported risk aversion is collected every year from 2003 to 2010. We then present evidence that the time variation is not merely noise, as it also varies with income, age, and health variations. As income increases, risk aversion decreases. Individuals who grow more anxious about their health become more averse to risk. The older an individual, the more risk averse s/he is.
Hence, we find that risk aversion is indeed correlated with time-variant components as well as time-invariant factors. We find the determinants of risk aversion using the random-effects model built byMundlak(1978). In terms of within-individual variation over time, income variation is negatively correlated, age variation is positively correlated, and higher education variation is negatively correlated with risk aversion. Between-variation across individuals is estimated using the panel average of each variable such as gender, income, age, health status, employment status, indebtedness, marital status, number of children, and education. The characteristics that explain individual risk aversion levels the most are being women (+), being older (+), being anxious about health (+), having debts (-), and education level (-). These results clearly highlight the time-variant and time-invariant components of risk aversion.
Our question then is whether time-invariant factors play a large role in predicting risk-related behaviors. If so, collecting the risk-aversion measure just once would be problematic because it would generate measurement errors. However, using various lagged risk-aversion variables and different averages, we find that lagged variables still have predictive power when it comes to behavior adopted by individuals. The inference is that what matters most when predicting behavior is between-variations across individuals,
rather than the time-varying component within individuals. This means that we can still use the risk-aversion difference between individuals as a good predictor to explain different behaviors across individuals. Yet better predictive power is obtained when using the average of risk aversion over the years. This could point to a possible improvement in survey design, suggesting that risk aversion be collected not just once, but at least every two years if we want to capture the time-variant component of risk aversion.
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