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- Title
Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?*.
- Authors
Malmendier, Ulrike; Nagel, Stefan
- Abstract
We investigate whether individual experiences of macroeconomic shocks affect financial risk taking, as often suggested for the generation that experienced the Great Depression. Using data from the Survey of Consumer Finances from 1960 to 2007, we find that individuals who have experienced low stock market returns throughout their lives so far report lower willingness to take financial risk, are less likely to participate in the stock market, invest a lower fraction of their liquid assets in stocks if they participate, and are more pessimistic about future stock returns. Those who have experienced low bond returns are less likely to own bonds. Results are estimated controlling for age, year effects, and household characteristics. More recent return experiences have stronger effects, particularly on younger people.
- Subjects
DEPRESSIONS (Economics); FINANCIAL risk management; STOCK exchanges; LIQUID assets; RISK-taking behavior; ECONOMIC recovery; SURVEYS; CASH management; CONSUMER attitudes
- Publication
Quarterly Journal of Economics, 2011, Vol 126, Issue 1, p373
- ISSN
0033-5533
- Publication type
Article
- DOI
10.1093/qje/qjq004