Relative deprivation and financial risk taking^✰

This study examines whether relative deprivation is associated with risk preference and behavior. Relative deprivation measured by the Yitzhaki and Deaton indices and financial risk-taking outcomes are obtained from a representative household survey of Korean adults. Results show that relative deprivation is negatively associated with risk aversion, and this association is significant for men and individuals who experienced increasing relative deprivation. However, relative deprivation is not associated with investment outcomes such as risky asset ownership and risky asset share of financial net worth. These results are consistent with reference-dependent preference and social-comparison model that incorporates social standing into utility function.