CXO

Financial Stress And Asymmetric Financial Decisions

Download Now Date Added: Dec 2010
Format: PDF

Building wealth requires saving, borrowing, and investing. These decisions may depend on stress due to the lack of financial security (low financial assets). Stress should influence personal responses - emotional, behavioral, and cognitive - that in turn could determine financial decisions. The link between stress and financial decisions could be asymmetric, so that fewer financial assets result in larger absolute financial decisions than more assets. The authors first divide households between stressed (financially insecure) and not stressed (financially secure) ones, using a threshold regression. Comparatively little assets divide stressed and not stressed households. They then show that low levels of financial assets have a larger adverse effect on personal responses among stressed households than among not stressed ones.