Do Psychological Shocks Affect Financial Risk Taking Behavior? A Study of U.S. Veterans

Contemporary Economic Policy

22 Pages Posted: 11 Aug 2011 Last revised: 28 Apr 2017

See all articles by Vicki L. Bogan

Vicki L. Bogan

Cornell University

David R. Just

Cornell University - Dyson School of Applied Economics and Management

Brian Wansink

Cornell University

Multiple version iconThere are 2 versions of this paper

Date Written: February 2012

Abstract

Traditional economic theories assume that individuals are endowed with certain risk preferences that are unaltered by experiences. However, recent evidence indicates that macroeconomic shocks do have an effect on an individual's willingness to take financial risks. In the context of investment decisions, we examine empirically whether individual's risk preferences are affected by other types of traumatic life experiences. Using a unique proprietary data set, we investigate whether personal traumatic experiences - such as the combat experiences of veterans - have long-term effects on financial risk taking behavior. We find that having experienced combat decreases the probability of investing in risky assets. Key policy implications are noted.

Keywords: Investment behavior, stockholding, veterans, combat, war, traumatic life experiences

JEL Classification: G11, D14

Suggested Citation

Bogan, Vicki L. and Just, David R. and Wansink, Brian, Do Psychological Shocks Affect Financial Risk Taking Behavior? A Study of U.S. Veterans (February 2012). Contemporary Economic Policy. Available at SSRN: https://ssrn.com/abstract=1907780 or http://dx.doi.org/10.2139/ssrn.1907780

Vicki L. Bogan (Contact Author)

Cornell University ( email )

Warren Hall
Ithaca, NY 14853
United States
607-254-7219 (Phone)

David R. Just

Cornell University - Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States
607-255-2086 (Phone)
607-255-9984 (Fax)

Brian Wansink

Cornell University ( email )

Ithaca, NY 14853
United States

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