Athens-Clarke County residents' households' debt, risk aversion and expectations for the future

Abstract

Using the data collected from Athens-Clarke County residents, this study investigated the effect of consumers’ risk aversion and their expectations regarding the future economic environment on both the dollar amount of their households’ total debt and the ratio of mortgage debt and auto debt to total debt, controlling socio-economic factors. Multiple regression with two hierarchical models was used to achieve the goal. Consumers’ risk aversion, employment status and educational level was found to have significant relationship with their households’ total debt. Meanwhile, the reliability and validity of 13- item instrument measuring respondents’ financial risk aversion were examined with Cronbach’s alpha and factor analysis. According to the reliability test and factor analysis results, ten items were retained to construct a ten-item instrument, which had an acceptable reliability with a Cronbach’s alpha of 0.72.