The Long-Lasting Effects of Experiencing Communism on Attitudes Towards Financial Markets

91 Pages Posted: 29 Jun 2020

See all articles by Christine Laudenbach

Christine Laudenbach

Goethe University Frankfurt

Ulrike Malmendier

University of California, Berkeley - Department of Economics; University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance

Date Written: June 2020

Abstract

Attitudes towards capital markets and stock-market investment still differ widely between Western and formerly communist countries, but there is also significant heterogeneity within the East. We argue that the speed of convergence is predicted by the quality of life-time experiences under communism. Utilizing novel German brokerage and bank data we document that, decades after Reunification, East Germans invest significantly less in stocks and hold more negative views on capital markets if they had unrelated positive experiences, e.g., from Olympic games or living in celebrated showcase cities. Results reverse for East Germans with negative experiences, like environmental pollution and religious oppression.

Keywords: Capital Markets, Communism, Life-time experiences, positive versus negative emotional tagging, Stock-market participation

JEL Classification: D03, D14, D83, D84, E21, G11

Suggested Citation

Laudenbach, Christine and Malmendier, Ulrike and Niessen-Ruenzi, Alexandra, The Long-Lasting Effects of Experiencing Communism on Attitudes Towards Financial Markets (June 2020). CEPR Discussion Paper No. DP14939, Available at SSRN: https://ssrn.com/abstract=3638044

Christine Laudenbach (Contact Author)

Goethe University Frankfurt ( email )

Gr├╝neburgplatz 1
Frankfurt, 60323
Germany

Ulrike Malmendier

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
(510) 642-8724 (Phone)
(510) 642-6615 (Fax)

HOME PAGE: http://www.econ.berkeley.edu/~ulrike/

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

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

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=918

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance ( email )

Mannheim, 68131
Germany

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