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Risk taking, preferences, and beliefs: Evidence from Wuhan

Author

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  • Bu, Di
  • Hanspal, Tobin
  • Liao, Yin
  • Liu, Yong
Abstract
We study risk taking in a panel of subjects in Wuhan, China - before, during the COVID-19 crisis, and after the country reopened. Subjects in our sample traveled for semester break in January, generating variation in exposure to the virus and quarantine in Wuhan. Higher exposure leads subjects to reduce planned risk taking, risky investments, and optimism. Our findings help unify existing studies by showing that aggregate shocks affect general preferences for risk and economic expectations, while heterogeneity in experience further affect risk taking through beliefs about individuals' own outcomes such as luck and sense of control.

Suggested Citation

  • Bu, Di & Hanspal, Tobin & Liao, Yin & Liu, Yong, 2021. "Risk taking, preferences, and beliefs: Evidence from Wuhan," SAFE Working Paper Series 301, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:301
    DOI: 10.2139/ssrn.3559870
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    Cited by:

    1. Björn Bos & Moritz A. Drupp & Jasper N. Meya & Martin F. Quaas, 2023. "Financial Risk-Taking under Health Risk," CESifo Working Paper Series 10387, CESifo.
    2. repec:cup:judgdm:v:17:y:2022:i:4:p:745-767 is not listed on IDEAS
    3. repec:jdm:journl:v:17:y:2022:i:4:p:745-767 is not listed on IDEAS

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    More about this item

    Keywords

    COVID-19; Risk taking; Beliefs; Formative experiences; Expectations; China;
    All these keywords.

    JEL classification:

    • G50 - Financial Economics - - Household Finance - - - General
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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