Do people feel less at risk? Evidence from disaster experience

• 成果类型: Article
• 署名作者: Gao, Ming; Liu, Yu-Jane; Shi, Yushui
• 署名单位: Peking University; Peking University; University of California System; University of California Irvine
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.06.010
• 发表日期: 2020
• 页码: 866-888
• 关键词: Disaster experiences; Risk perceptions; Incomplete information learning; Salience theory; risk preferences

摘要

Past studies typically have focused on whether people perceive more rare risk after experiencing catastrophic disasters. We show that people can also feel less risk with unexpected lucky disaster experience. By exploring a novel identification strategy based on households' expectations, we find that households perceive less (more) risk when they experience disasters that have lower (higher) fatalities than what was expected. This opposite experience effect of rare disasters is substantial. A one standard deviation increase in the negative (positive) experience shock is associated with a 1.71% decrease (a 1.31% increase) in the life insurance-to-portfolio ratio. We discuss three possible mechanisms to account for our empirical findings: incomplete information learning, salience theory, and change in risk preferences. (C) 2020 Elsevier B.V. All rights reserved.