Data on the investments of a random sample of the U.S. population are used to derive relative risk aversion indexes from actual asset allocations. A comparison of risk aversion indexes for various demographic and socioeconomic categories reveals distinct differences for three groups individuals over 65, those with incomes below the poverty level and the very wealthy.
A model developed to examine the hypothesized relationships between risk tolerance and given variables indicates that relative risk aversion decreases as one rises above the poverty level and decreases significantly for the very wealthy. It also decreases with age but only up to a point. After age 65 (retirement), risk aversion increases with age.