Doctoral thesis

Essays in Household Finance

Is Risk Aversion Really Constant? A Reinvestigation with Danish Micro-Level Data: This study revisits the important and widely used constant relative risk aversion (CRRA) assu ...

Author(s) :

Mads Hesselhold, PhD

Head of Balanced Portfolios at Nykredit Asset Management (Denmark)

Abstract :

Is Risk Aversion Really Constant? A Reinvestigation with Danish Micro-Level Data: This study revisits the important and widely used constant relative risk aversion (CRRA) assumption using a new and proprietary panel data set that is not exposed to inertia. It specifically tests whether individuals' risk preferences change in response to changes in nancial wealth at a micro level. The analysis reveals that individuals' risk aversion indeed changes as a response to changes in the wealth of those individuals, with a delay, and that the elasticity is negative. Results are consistent with the expectations of decreasing relative risk aversion (DRRA) and habit formation preferences. Further, individuals' risk aversion is positively elastic to aggregate market volatility. Finally, signs of heterogeneity in elasticities are observed across di erent levels of risk preferences.

Is Asset Location Considered by Individual Investors? Evidence from Danish Retail Accounts: This paper empirically investigates the tax awareness of individual investors in a unique Danish dataset. Theory does not always reveal a clear conclusion for optimal asset location, and, by exploiting a proprietary Danish panel of retail investors, this study investigates whether any of the theoretical conclusions hold empirically. First, the results show that there exists a difference in the allocation between retirement-related savings accounts and conventional savings accounts. Further, there are indications that some of these differences can be explained primarily by the precautionary savings motive. No clear signs of a tax-optimizing behavior among the individuals are found in the data.

Date : 10/03/2020
Thesis Committee :

Supervisor: Abraham Lioui, EDHEC Business School

External reviewer: Samuli Knüfer, BI Norwegian Business School

Other committee member: Nikolaos Tessaromatis, EDHEC Business School

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