The Impact of Severe Weather on Risk Preferences

Abstract

This paper analyzes the effect of severe weather shocks on risk preferences by using U.S. mutual fund managers as a case study. The mutual fund data is analyzed through a number of techniques including fixed effects modeling, propensity score matching, and a difference-in- differences framework to control for confounding variables. The results suggest that certain weather shocks increase people’s preference for risk as found in other similar analysis.