The Effects of Marriage and Divorce on Financial Investments: Learning to Love or Hate Risk?

Charlotte Christiansen, Juanna Schröter Joensen () and Jesper Rangvid ()
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Juanna Schröter Joensen: Stockholm School of Economics, Postal: Sveavägen 65, Box 6501, SE 113 83 Stockholm, Sweden
Jesper Rangvid: Department of Finance, Copenhagen Business School, Postal: Solbjerg Plads 3, 2000 Frederiksberg, Denmark

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We investigate how changes in marital status affect the decision to take on financial risks. As an alternative to the traditional approach of comparing different groups of investors (men and women) at each point in time, we use a difference-in-differences estimation strategy to compare how the same individual invests at different points in time (before and after marriage or divorce) compared to a benchmark investor, thereby controlling for unobserved systematic differences as well as various background characteristics. We investigate both the propensity to participate in the stock market and the propensity to invest in more risky portfolios. We find that marriage acts as a financial risk-reducer for men and as a financial risk-increaser for women, in the sense that women increase the fraction of wealth invested in stocks after marriage and decrease it after divorce, whereas men show the opposite investment behavior.

Keywords: Gender; Marriage; Divorce; Difference-in-differences; Stock market participation; Portfolio choice. (search for similar items in EconPapers)
JEL-codes: D14 G11 J16 (search for similar items in EconPapers)
Pages: 28
Date: 2010-09-01
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Citations: View citations in EconPapers (5)

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