Ain't got no, I got life: Childhood exposure to WW2 and financial risk taking in adult life

Davide Bellucci, Giulia Fuochi and Pierluigi Conzo

No 570, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: Childhood adverse experiences might have long-lasting effects on decisions under uncertainty in adult life. Merging the European Survey on Health, Ageing and Retirement with data on conflict events happened during Second World War, and relying on region-by-cohort variation in war exposure, we show that warfare exposure during childhood is associated with lower financial risk taking in later life. Individuals who experienced war episodes as children hold less – and are less likely to hold – stocks, but are more likely to hold life insurance, compared to non-exposed individuals. Effects are robust to the inclusion of potential mediating factors, and are tested for nonlinearity and heterogeneity. In addition, war-exposed respondents show higher resilience to financial shocks, as they react less dramatically to stock market losses. By shaping cognitive schemata, the experience of war might have increased the perception of uncertainty and uncontrollability of the environment, leading to an overestimation of risks and of the likelihood of negative events.

Keywords: financial risk taking; risk aversion; stocks; life insurance; life experiences; Second World War. (search for similar items in EconPapers)
JEL-codes: D14 D81 D91 G01 G11 (search for similar items in EconPapers)
Pages: pages 50
Date: 2018
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Working Paper: Ain’t got no, I got life: Childhood exposure to WW2 and financial risk taking in adult life (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:570

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