Terrorist attacks and investor risk preference: Evidence from mutual fund flows

• 成果类型: Article
• 署名作者: Wang, Albert Y.; Young, Michael
• 署名单位: Auburn University System; Auburn University; University of Virginia
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.02.008
• 发表日期: 2020
• 页码: 491-514
• 关键词: Terrorism; risk preference; risk aversion; Visceral emotions; MUTUAL FUND FLOWS

摘要

Using a comprehensive list of terrorist attacks over three decades, we find that aggregate investor risk aversion inversely relates to terrorist activity in the United States. A one standard deviation increase in the number of attacks each month leads to a $75.09 million drop in aggregate flows to equity funds and a $56.81 million increase to government bond funds. Tests on alternative channels further suggest that the shift in aggregate risk aversion is driven mainly by an emotional shock rather than changes in wealth or the outside environment. We also investigate possible alternate explanations for reduced flows to risky assets. Our evidence is consistent with a fear-induced increase in aggregate risk aversion. (C) 2020 Elsevier B.V. All rights reserved.