Understanding the Effects of Marriage and Divorce on Financial Investments: The Role of Background Risk Sharing
35 Pages Posted: 3 Sep 2010 Last revised: 14 Mar 2014
Date Written: March 13, 2014
We investigate how changes in marital status affect financial investments and how these effects vary with background risk. We use detailed register based panel data and difference-in-differences estimators to benchmark common unobserved influences on financial investments. Women increase the fraction of wealth invested in stocks after marriage and decrease it after divorce, whereas men show the opposite behavior. Households whose joint labor income risk is reduced more by marriage have a higher increase in their exposure to risky assets in marriage. Thus income risk sharing in the household is important for financial risk-taking and investment responses to marital transitions.
Keywords: Gender, Marriage and divorce, Stock market participation, Portfolio choice, Labor income risk sharing
JEL Classification: G11, J12, J16, D14
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