The purpose of this study is to examine determinants of household’s willingness to take
financial risks, particularly the effect of households’ expectation. The data this study used are
the Survey of Consumer Finances 2007 by which researchers can examine the household
financial issues before the financial crisis. By employing multinomial logit regression, the
new finding of this study is that when the households expect the future economy will be
better, they are not willing to take either no or substantial financial risk. This study uses the
uncertainty theory with the timing of the survey to interpret this seemingly unintuitive result.
Other findings are that age, more working people in a household, male, education and
majority race are household characteristics positively affecting the probability of household’s
willingness to take average and above-average financial risks.
Journal of Financial Counseling and Planning (Econlit)