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

Adam Smith Business School, University of Glasgow; Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II; Center for Financial Studies (CFS); 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, Dimitrios 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

Dimitrios Christelis (Contact Author)

Adam Smith Business School, University of Glasgow ( email )

Room 207F, Gilbert Scott Building
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Glasgow, Scotland G12 8QQ
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+44 141330 2000 (ext. 0624) (Phone)

HOME PAGE: http://www.gla.ac.uk/schools/business/staff/dimitrioschristelis/

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

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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