High risk aversion leads to decreased savings and investment in uncertainty
The article explores how different people's willingness to take risks affects their investment decisions. By using a simple model, the researchers show that when overall market uncertainty goes up, those who are less afraid of risks may see better future returns from risky investments. On the other hand, those who are more risk-averse may also benefit from safer investments. However, overall savings and investments tend to decrease because people are not always willing to give up current consumption for future gains.