Risk, culture and investor behavior in small (but notorious) Eurozone countries

This research investigates how culture moderates the impact of risk on individual investors’ trading behavior in nine Eurozone countries, where risk is measured by conventional and extreme risk. These markets were particularly affected by the global financial crisis, the subsequent European banking crisis, and the European sovereign debt crisis. Using mutual fund flows as proxy of investors’ trading behavior, our evidence indicates that country culture variable significantly affects investor’ trading responsiveness to risk. Specifically, the impact of risk on fund flows is significantly positive and is larger in scale in countries with individualist cultures.