People are people: A comparative analysis of risk attitudes across Europe

In this paper, we conduct a detailed examination of the determinants of attitudes to financial risk among retail investors in six European countries (Belgium, France, Germany, Italy, Spain and the United Kingdom). We find that respondents from the United Kingdom and Belgium are the most risk tolerant while those from Spain are the least. We observe remarkable similarities in the distributions of risk tolerance across countries despite cultural differences and considerable variations in the extent to which risky investing is undertaken as a routine part of financial planning. We further show that country effects in the cross-sectional variation of attitude to risk scores are swamped by the impacts of gender, salary and wealth, while financial knowledge and prior investment experience are much more important still. Our results have implications for regulators and those who wish to encourage European investors to consider going beyond bank savings and guaranteed products to more prevalent stock market investing in an era of negative real interest rates.