Understanding the Effects of Marriage and Divorce on Financial Investments: The Role of Background Risk Sharing

17 Pages Posted: 21 Nov 2014  

Charlotte Christiansen

University of Aarhus - CREATES

Juanna Schrøter Joensen

University of Chicago; Institute for the Study of Labor (IZA)

Jesper Rangvid

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: January 2015

Abstract

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.

JEL Classification: G11, J12, J16, D14

Suggested Citation

Christiansen, Charlotte and Joensen, Juanna Schrøter and Rangvid, Jesper, Understanding the Effects of Marriage and Divorce on Financial Investments: The Role of Background Risk Sharing (January 2015). Economic Inquiry, Vol. 53, Issue 1, pp. 431-447, 2015. Available at SSRN: https://ssrn.com/abstract=2528807 or http://dx.doi.org/10.1111/ecin.12113

Charlotte Christiansen (Contact Author)

University of Aarhus - CREATES ( email )

Fuglesangs Alle 4
Aarhus V, DK 8210
Denmark

Juanna Schrøter Joensen

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Jesper Rangvid

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
DENMARK

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