Traumatic Life Events and Financial Risk-Taking: The Enduring Impact of Hunger

39 Pages Posted: 10 Jan 2019

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

Date Written: December 1, 2018

Abstract

Do traumatic past life events - such as experiencing hunger - influence financial risk-taking in older age and what is the mechanism underlying this link? To answer these questions, we use micro data from 13 European countries and investigate the decision to own risky financial assets, defined both narrowly (i.e., consisting of stocks, mutual funds and IRAs) and more widely (i.e., including whole life insurance). We address the potential endogeneity of food deprivation episodes by employing non-parametric partial identification methods that bound its causal effect on the ownership of risky financial assets while making very weak assumptions. We find that experiencing hunger has a decidedly negative effect on owning risky assets. When investigating the mechanism behind these findings, we find a significant adverse causal impact of hunger on one’s willingness to take financial risks.

Keywords: hunger, financial risk, portfolio choice, partial identification, SHARE

JEL Classification: G11, D14, J14, C14

Suggested Citation

Christelis, Dimitris and Dobrescu, Loretti Isabella, Traumatic Life Events and Financial Risk-Taking: The Enduring Impact of Hunger (December 1, 2018). Available at SSRN: https://ssrn.com/abstract=3308244 or http://dx.doi.org/10.2139/ssrn.3308244

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 )

Grüneburgplatz 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

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