An Evaluation of the Effect of the COVID-19 Pandemic on the Risk Tolerance of Financial Decision Makers

Wookjae Heo; Abed Rabbani; John E Grable

doi:10.1016/j.frl.2020.101842

An Evaluation of the Effect of the COVID-19 Pandemic on the Risk Tolerance of Financial Decision Makers

Financ Res Lett. 2021 Jul:41:101842. doi: 10.1016/j.frl.2020.101842. Epub 2020 Nov 11.

Authors

Wookjae Heo¹, Abed Rabbani², John E Grable³

Affiliations

¹ Assistant Professor, Department of Consumer Sciences, College of Education and Human Sciences, South Dakota State University, SWG 149, Box 2275A, Brookings, SD, United States 57007, (605) 688-5835.
² Assistant Professor, Department of Personal Financial Planning, College of Human Environmental Sciences, University of Missouri, 239B Stanley Hall, Columbia, MO, United States 65211, (573) 882-9187.
³ Professor, Department of Financial Planning, Housing, and Consumer Economics, College of Family and Consumer Sciences, University of Georgia, 124 Barrow Hall, Athens, GA, United States 30602, (706) 542-4758.

Abstract

This paper documents the negative effect of the COVID-19 pandemic on financial risk attitudes across a broad sample of financial decision makers (N = 18,913). Findings show that the risk tolerance of financial decision makers can be altered when an extreme economic, social, or environmental shock occurs. A general shift away from be willing to take financial risk was noted after the COVID-19 pandemic emergency declaration. The COVID-19 pandemic shifted risk preference downward for the majority of financial decision makers in this study.

Keywords: COVID-19; Financial Risk Tolerance.