Household risk taking after the financial crisis

•We study how the crisis in 2008/2009 affects households’ willingness to take risks.•The German SAVE study requested wealth changes attributed to the crisis.•Total wealth change unrelated to changes in the willingness to take risks.•Attributing losses to the crisis decreases the willingness to take risks.•The result suggests an emotional reaction.

This study investigates whether and how the crisis in 2008/2009 affects households’ risk attitudes, subjective risk and return expectations, and planned financial risk taking using the German SAVE study. Households’ wealth change from end-2007 to end-2009 is not found to have an effect. However, households that attribute losses to the crisis decreased their risk tolerance and planned risk taking; the probability of expecting an increase in risks and returns is increased. According to economic theory, wealth changes attributed to a dramatic event should not have a different effect than other wealth changes. The results suggest an emotional reaction.