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Relationships between bank customers’ risk attitudes and their balance sheets
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management. KTH, School of Architecture and the Built Environment (ABE), Centres, Centre for Banking and Finance, Cefin.
2015 (English)Report (Other academic)
Abstract [en]

This paper analyzes relationships between Swedish bank customers’ risk appetite and their financial assets and debt, controlling for demographic, socio-economic, financial and educational variables including financial literacy. We use subjective risk measures, i.e. risk tolerance and risk preference, as well as an objective risk measure, i.e. relating customers’ saving deposits to more risky stocks and mutual funds as a share of total financial assets. Bank customers with high risk appetite have significantly more financial assets compared with those with medium and low risk appetite. The subjective risk measures show that those with high risk appetite have significantly higher debt than those with low risk appetite. The objective risk measure shows the opposite. The paper concludes that it is important to use several measures of risk. Also, policy makers and banks need to measure bank customers’ risk appetite in a more systematic and transparent way, in order to improve both the banks’ and their customers’ risk management, and not less importantly, to decrease macroeconomic risks.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2015. , 28 p.
, Working Paper Series, Department of Real Estate and Construction Management & Centre for Banking and Finance (cefin), KTH, 2015:12
Keyword [en]
Household saving, debt, risk attitudes
National Category
Business Administration
Research subject
Business Studies
URN: urn:nbn:se:kth:diva-181693OAI: diva2:899738

QC 20160225

Available from: 2016-02-02 Created: 2016-02-02 Last updated: 2016-02-25Bibliographically approved

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Working paper(274 kB)53 downloads
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