Economic booms and busts drive fluctuating risk aversion, impacting asset pricing.
The article explores how people's willingness to take risks changes depending on the state of the economy. By analyzing data, the researchers found that risk aversion goes up during economic downturns and down during economic upswings. They also discovered that people tend to be more cautious during times of uncertainty, like during recessions. This new understanding of how risk aversion fluctuates with economic conditions can help us better predict and understand financial markets.