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Early Life Conditions and Financial Risk-taking in Older Age

Loretti Dobrescu (), Dimitris Christelis () and Alberto Motta ()
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Alberto Motta: School of Economics, Australian School of Business, University of New South Wales

No 201208, Working Papers from ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales

Abstract: Using life-history survey data from eleven European countries, we investigate whether childhood conditions, such as socioeconomic status, cognitive abilities and health problems influence portfolio choice and risk attitudes later in life. After controlling for the corresponding conditions in adulthood, we find that superior cognitive skills in childhood (especially mathematical abilities) are positively associated with stock and mutual fund ownership. Childhood socioeconomic status, as indicated by the number of rooms and by having at least some books in the house during childhood, is also positively associated with the ownership of stocks, mutual funds and individual retirement accounts, as well as with the willingness to take financial risks. On the other hand, less risky assets like bonds are not affected by early childhood conditions. We find only weak effects of childhood health problems on portfolio choice in adulthood. Finally, favourable childhood conditions affect the transition in and out of risky asset ownership, both by making divesting less likely and by facilitating investing (i.e., transitioning from non-ownership to ownership).

Keywords: Portfolio Choice; Childhood; Socioeconomic Status; Cognition; Health; Financial Risk (search for similar items in EconPapers)
JEL-codes: G11 D14 E21 J13 C23 C25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age
Date: 2012-03
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Related works:
Working Paper: Early Life Conditions and Financial Risk–Taking in Older Age (2011) Downloads
Working Paper: Early life conditions and financial risk-taking in older age (2011) Downloads
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