The Determinants of Risk Aversion: The Role of Intergenerational Transmission

This article studies the relationship between risk attitudes and individual characteristics focusing on the intergenerational transmission of risk preferences. We use a dataset of a sample of Italian students which allows us to build different measures of risk aversion based, respectively, on a survey asking students about their willingness to invest in a risky asset and about their preferences for job security and on the results of an entry test using explicit penalty points in the case of incorrect answers. In line with the findings highlighted by the existing literature, we find that women are more risk averse than men, more patient subjects are more risk averse, while high-ability students are less risk averse. As far as intergenerational transmission of preferences is concerned, it emerges that students whose fathers are entrepreneurs have a higher propensity to take risks, while students whose fathers are employed in the public sector are more risk averse. Only fathers matter with regards to their children’s risk attitudes. These results are robust to different measures of risk aversion and to different specifications of our model.