NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Risk Aversion and Wealth: Evidence from Person-to-Person Lending Portfolios

Daniel Paravisini, Veronica Rappoport, Enrichetta Ravina

NBER Working Paper No. 16063
Issued in June 2010
NBER Program(s):   AP   CF   ME

We estimate risk aversion from the actual financial decisions of 2,168 investors in Lending Club (LC), a person-to-person lending platform. We develop a methodology that allows us to estimate risk aversion parameters from each portfolio choice. Since the same individual makes repeated investments, we are able to construct a panel of risk aversion parameters that we use to disentangle heterogeneity in attitudes towards risk from the elasticity of investor-specific risk aversion to changes in wealth. In the cross section, we find that wealthier investors are more risk averse. Using changes in house prices as a source of variation, we find that investors become more risk averse after a negative wealth shock. These preferences consistently extrapolate to other investor decisions within LC.

download in pdf format
   (749 K)

email paper

This paper was revised on December 5, 2011

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16063

Users who downloaded this paper also downloaded these:
Freedman and Jin w16855 Learning by Doing with Asymmetric Information: Evidence from Prosper.com
Iyer, Khwaja, Luttmer, and Shue w15242 Screening Peers Softly: Inferring the Quality of Small Borrowers
Freedman and Jin w19820 The Information Value of Online Social Networks: Lessons from Peer-to-Peer Lending
Paravisini, Rappoport, Schnabl, and Wolfenzon w16975 Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data
Frankel and Saravelos w16047 Are Leading Indicators of Financial Crises Useful for Assessing Country Vulnerability? Evidence from the 2008-09 Global Crisis
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

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

Contact Us