TY  - RPRT
        AU  - Hvide, Hans K.
AU  - Panos, Georgios A.
        TI  - Risk Tolerance and Entrepreneurship
        PY  - 2013/Feb/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 7206
        UR  - https://www.iza.org/publications/dp7206
        AB  - A tradition from Knight (1921) argues that more risk tolerant individuals are more likely to become entrepreneurs, but perform worse. We test these predictions with two risk tolerance proxies: stock market participation and personal leverage. Using investment data for 400,000 individuals, we find that common stock investors are around 50 percent more likely to subsequently start up a firm. Firms started up by stock market investors have about 25 percent lower sales and 15 percent lower return on assets. The results are similar using personal leverage as risk tolerance proxy. We consider alternative explanations including unobserved wealth and behavioral effects.
        KW  - entrepreneurial entry
KW  - entrepreneurial performance
KW  - firm entry
KW  - firm performance
KW  - firm productivity
KW  - firm survival
KW  - overconfidence
KW  - risk aversion
KW  - risk tolerance
KW  - stock market participation
        ER  -