Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets

Sandra Black, Paul Devereux, Petter Lundborg and Kaveh Majlesi

No 21043, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate whether acquiring more education when young has long-term effects on risk-taking behavior in financial markets and whether the effects spill over to spouses and children. There is substantial evidence that more educated people are more likely to invest in the stock market. However, little is known about whether this is a causal effect of education or whether it arises from the correlation of education with unobserved characteristics. Using exogenous variation in education arising from a Swedish compulsory schooling reform in the 1950s and 1960s, and the wealth holdings of the population of Sweden in 2000, we estimate the effect of education on stock market participation and risky asset holdings. We find that an extra year of education increases stock market participation by about 2% for men but there is no evidence of any positive effect for women. More education also leads men to hold a greater proportion of their financial assets in stocks and other risky financial assets. We find no evidence of spillover effects from male schooling to the financial decisions of spouses or children.

JEL-codes: D14 D31 G11 I24 I26 (search for similar items in EconPapers)
Date: 2015-03
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Published as Sandra E Black & Paul J Devereux & Petter Lundborg & Kaveh Majlesi, 2018. "Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets*," Review of Finance, vol 22(3), pages 951-975.

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Related works:
Journal Article: Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets (2018)
Working Paper: Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets (2015)
Working Paper: Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets (2015)
Working Paper: Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets (2015)
Working Paper: Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets (2015)
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