High risk-taking leads to lower savings and investments, study finds
The study explores how people's different attitudes towards risk affect their investment decisions. By using a model with various levels of risk aversion, the researchers found that when uncertainty in the economy increases, less risk-averse individuals tend to invest more in risky assets, while more risk-averse individuals prefer safer options like bonds. This balancing act helps to stabilize future returns, but it also leads to a decrease in overall savings and investment due to a reluctance to delay consumption.