Home > Behavioral Econ., Risk-Taking > Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?

Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?

Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?

Ulrike Malmendier and Stefan Nagel

The Quarterly Journal of Economics (2011) 126 (1): 373-416.
doi: 10.1093/qje/qjq004

We investigate whether individual experiences of macroeconomic shocks 
affect financial risk taking, as often suggested for the generation that 
experienced the Great Depression. Using data from the Survey of 
Consumer Finances from 1960 to 2007, we find that individuals 
who have experienced low stock market returns throughout their lives 
so far report lower willingness to take financial risk, are less likely 
to participate in the stock market, invest a lower fraction of their 
liquid assets in stocks if they participate, and are more pessimistic about 
future stock returns. Those who have experienced low bond returns are 
less likely to own bonds. Results are estimated controlling for age, 
year effects, and household characteristics. More recent return experiences 
have stronger effects, particularly on younger people.
Advertisements
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: