Traumatic Life Events and Financial Risk-Taking: the Enduring Impact of Hunger

Christelis, D. and Dobrescu, L. I. (2019) Traumatic Life Events and Financial Risk-Taking: the Enduring Impact of Hunger. Working Paper. Social Science Research Network. (doi: 10.2139/ssrn.3308244).

Abstract

Do traumatic past life events - such as experiencing hunger - influence financial risk-taking in older age and what is the mechanism underlying this link? To answer these questions, we use micro data from 13 European countries and investigate the decision to own risky financial assets, defined both narrowly (i.e., consisting of stocks, mutual funds and IRAs) and more widely (i.e., including whole life insurance). We address the potential endogeneity of food deprivation episodes by employing non-parametric partial identification methods that bound its causal effect on the ownership of risky financial assets while making very weak assumptions. We find that experiencing hunger has a decidedly negative effect on owning risky assets. When investigating the mechanism behind these findings, we find a significant adverse causal impact of hunger on one’s willingness to take financial risks.

• Item Type: Research Reports or Papers (Working Paper)
• Keywords: Hunger, financial risk, portfolio choice, partial identification, SHARE.
• Status: Published
• Glasgow Author(s) Enlighten ID: Christelis, Professor Dimitris
• Authors: Christelis, D., and Dobrescu, L. I.
• Subjects: H Social Sciences > HB Economic Theory; H Social Sciences > HG Finance
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Publisher: Social Science Research Network