What Factors Portend Changes in Household Relative Risk AVersion

Empirical research has examined economic and demographic factors related to risk aversion primarily using cross‐sectional data. We add to this literature by investigating factors that are associated with changes in household relative risk aver‐sion (RRA). Additionally, we evaluate changes in RRA during a time period that includes an economic shock loss. We use data from the 1983–1989 Survey of Consumer Finances panel study to calculate changes in RRA. Our results shed light on behavioral and attitudinal changes in household risk taking across time. Specifically, we find that household RRA is positively related to increases in assets, age, and education, and negatively related to increases in human capital. [Key words: risk aversion, education, human capital]