Cultural Origins of Investment Behavior

Andreas Ek, Gunes Gokmen and Kaveh Majlesi

No 17412, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: There are large cross-country differences in the portfolio composition of individual investors. In this paper, we study the role of cultural heritage in explaining these differences by combining data on the asset allocation of second-generation immigrants in Sweden with the cultural attributes of their parents' countries of origin. Descendants of more risk-loving and less patient cultures take more idiosyncratic risk by keeping a higher share of their financial wealth in directly held stocks. They are also less likely to delegate their equity investment, as they assign a lower share of their wealth to mutual funds. We show that these findings are not driven by the selection of migrating parents, other country of origin attributes, or individual socio-economic characteristics. Our findings also provide an alternative explanation for under-diversification and lack of delegation among many individual investors.

Keywords: Culture; Cultural transmission; Delegation; Diversification; Investment behavior; Risk preference; Time preference (search for similar items in EconPapers)
JEL-codes: G11 G40 G50 G51 Z10 (search for similar items in EconPapers)
Date: 2022-06
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Working Paper: Cultural Origins of Investment Behavior (2022)
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