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

11 Pages Posted: 7 May 2013

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

Retired

Multiple version iconThere are 2 versions of this paper

Date Written: July 2013

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 an 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.

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 (July 2013). Contemporary Economic Policy, Vol. 31, Issue 3, pp. 457-467, 2013, Available at SSRN: https://ssrn.com/abstract=2261555 or http://dx.doi.org/10.1111/j.1465-7287.2012.00319.x

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

Retired ( email )

607-319-0123 (Phone)

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