Early Life Conditions and Financial Risk-Taking in Older Age

48 Pages Posted: 30 May 2011 Last revised: 14 Jan 2013

See all articles by Dimitris Christelis

Dimitris Christelis

Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II; Center for Financial Studies (CFS); ARC Centre of Excellence in Population Ageing Research (CEPAR); Netspar

Loretti Dobrescu

University of New South Wales, School of Economics

Alberto Motta

UNSW Australia Business School, School of Economics

Date Written: November 6, 2012

Abstract

Using life-history survey data from eleven European countries, we investigate whether childhood conditions, such as socioeconomic status, cognitive abilities and health problems influence portfolio choice and risk attitudes later in life. After controlling for the corresponding conditions in adulthood, we find that superior cognitive skills in childhood (especially mathematical abilities) are positively associated with stock and mutual fund ownership. Childhood socioeconomic status, as indicated by the number of rooms and by having at least some books in the house during childhood, is also positively associated with the ownership of stocks, mutual funds and individual retirement accounts, as well as with the willingness to take financial risks. On the other hand, less risky assets like bonds are not affected by early childhood conditions. We find only weak effects of childhood health problems on portfolio choice in adulthood. Finally, favorable childhood conditions affect the transition in and out of risky asset ownership, both by making divesting less likely and by facilitating investing (i.e., transitioning from non-ownership to ownership).

Keywords: Portfolio Choice, Childhood, Socio-economic Status, Cognition, Health, Financial Risk

JEL Classification: G11, D14, E21, J13, C23, C25

Suggested Citation

Christelis, Dimitris and Dobrescu, Loretti Isabella and Motta, Alberto, Early Life Conditions and Financial Risk-Taking in Older Age (November 6, 2012). Available at SSRN: https://ssrn.com/abstract=1855286 or http://dx.doi.org/10.2139/ssrn.1855286

Dimitris Christelis (Contact Author)

Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II ( email )

Via Cintia, Monte S. Angelo
Naples, NA 80126
Italy

Center for Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

Australian School of Business
Ground Floor, East Wing UNSW Kensington Campus
Sydney, New South Wales NSW 2052
Australia
+61 (2) 9931 9202 (Phone)

HOME PAGE: http://www.cepar.edu.au

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Loretti Isabella Dobrescu

University of New South Wales, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Alberto Motta

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

HOME PAGE: http://https://sites.google.com/site/albertomottaeconomics/

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