Abstract
We trace the impact of formative experiences on portfolio choice. Plausibly exogenous variation in workers’ exposure to a depression allows us to identify the effects and a new estimation approach makes addressing wealth and income effects possible. We find that adversely affected workers are less likely to invest in risky assets. This result is robust to a number of control variables and it holds for individuals whose income, employment, and wealth were unaffected. The effects travel through social networks: individuals whose neighbors and family members experienced adverse circumstances also avoid risky investments.
Original language | English |
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Pages (from-to) | 133-166 |
Number of pages | 34 |
Journal | Journal of Finance |
Volume | 72 |
Issue number | 1 |
Early online date | 2016 |
DOIs | |
Publication status | Published - 1 Feb 2017 |
MoE publication type | A1 Journal article-refereed |