Risk attitudes, investment behavior and linguistic variation

Matija Kovacic (matija.kovacic@unive.it), Francesco Costantini and Juliana Bernhofer
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Matija Kovacic: Department of Economics, University Of Venice CÃ Foscari
Francesco Costantini: Department of Humanities, University Of Udine

No 2015:, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: This paper explores the relationship between linguistic variation and individual attitudes toward risk and uncertainty. Linguistic variation refers to differences in linguistic forms across languages. According to the linguistic relativity hypothesis, differences in grammatical structures and the vocabulary may affect how speakers of distinct lan- guages perceive and think about the world. We develop a specific linguistic marker that classiffes languages according to the number of non-indicative moods in irrealis contexts in their respective grammars. These grammatical categories express situations involving uncertainty, and the frequency of their use may be closely related to the overall degree of uncertainty perceived by individuals. Using data from the Survey of Health, Aging and Retirement in Europe (SHARE) and World Value Survey (WVS), we show that speakers of languages where non-indicative moods are used more intensively are on average more risk averse. This evidence holds both across countries and within linguistically heterogeneous countries. The results are robust to the inclusion of additional set of regressors and several fixed-effect controls for individual characteristics. Finally, we use our linguistic marker to instrument individual attitudes toward risk in the structural model for financial assets accumulation.

Keywords: Language; Risk Aversion; Financial Assets Accumulation; Instrumental Variables (search for similar items in EconPapers)
JEL-codes: C36 D14 D81 D91 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2015
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2015:34

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