NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Risk Aversion and Clientele Effects

Douglas W. Blackburn, William N. Goetzmann, Andrey D. Ukhov

NBER Working Paper No. 15333
Issued in September 2009
NBER Program(s):   AP

We use traded options on growth and value indices to test for clientele differences in risk preferences. Value investors appear to have exhibited a higher average level of risk aversion than growth investors for two different time periods in the late 1990’s and early 2000’s. We construct a model of time-varying clientele preferences that allows investors with different levels of risk-aversion to switch between investment styles conditional upon the evolution of returns and risk. The model makes predictions about the autocorrelations structure of measured risk parameters and also about the autocorrelation and cross-autocorrelation of fund flows by style. Empirical tests of the model provide evidence consistent with the existence of style switchers—investors who move funds between growth and value securities. We construct trading strategies in the value and growth index options markets that effectively buy risk from one clientele and sell it to another. These strategies generated modest positive returns over the period of study.

download in pdf format
   (356 K)

email paper

This paper is available as PDF (356 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15333

Users who downloaded this paper also downloaded these:
Grier and Strebel w0481 An Implicit Clientele Test of the Relationship between Taxation and Capital Structure
Borghans, Golsteyn, Heckman, and Meijers w14713 Gender Differences in Risk Aversion and Ambiguity Aversion
Barberis, Shleifer, and Wurgler w8895 Comovement
Paravisini, Rappoport, and Ravina w16063 Risk Aversion and Wealth: Evidence from Person-to-Person Lending Portfolios
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us