 The shadow of the past: Financial risk taking and negative life eventsAlessandro Bucciol and Luca Zarri Journal of Economic Psychology, 2015, vol. 48, issue C, 1-16 Abstract: Based on data from the four 2004–2010 waves of the US Health and Retirement Study (HRS), we show that financial risk taking is significantly related to life-history negative events out of an individual’s control. Using observed portfolio decisions to proxy for risk taking, we find correlation with two of such individual-specific events: having been victim of a physical attack and (especially) the loss of a child are associated with lower and less frequent investments in risky assets, with an intensity similar to that of the beginning, in 2008, of a collectively experienced event such as the recent financial crisis. We also find evidence that the correlation of risk taking with a child loss is long-lasting, as opposed to the correlation with a physical attack that disappears after few years. Our analysis is more in favor of a preference-based – rather than a belief-based – explanation of the observed change in risk taking. Overall our findings indicate that the past, especially through the loss of a child, casts a long shadow that extends over individuals’ current decisions also within unrelated domains. Keywords: Risk taking; Financial asset ownership; Negative life events; Behavioral finance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:48:y:2015:i:c:p:1-16 DOI: 10.1016/j.joep.2015.02.006 Access Statistics for this article Journal of Economic Psychology is currently edited by G. Antonides and D. Read More articles in Journal of Economic Psychology from Elsevier |
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