Associate Professor of Economics Ann Owen and Assistant Professor of Economics Stephen Wu presented a paper titled "Financial Shocks and Worry About the Future" at the Western Economic Association Meetings in San Francisco on July 6.
The paper examined how individuals adjust their expectations about the future when they receive financial shocks. The research found that households worry more about their future financial position when they have bad luck, even after controlling for the effect of these shocks on overall wealth.
Supporting evidence suggested that at least part of the increased worry about the future is due to an increase in general pessimism rather than changes in an individual's own circumstances. This insight into individual decision-making may help to explain the puzzling savings behavior of many Americans.
