The shadow of the past: Financial risk taking and negative life events

TitleThe shadow of the past: Financial risk taking and negative life events
Publication TypeJournal Article
Year of Publication2015
AuthorsBucciol, A, Zarri, L
JournalJournal of Economic Psychology
KeywordsHealth Conditions and Status, Methodology, Net Worth and Assets, Risk Taking

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. 2015 Elsevier B.V.


Export Date: 29 May 2015

Endnote Keywords

Behavioral finance/Financial asset ownership/Negative life events/Risk taking

Endnote ID


Citation Key8189