Business Education and Portfolio Returns

67 Pages Posted: 22 Nov 2022 Last revised: 3 May 2024

See all articles by Adam Altmejd

Adam Altmejd

Stockholm University - Swedish Institute for Social Research (SOFI); Stockholm School of Economics - Department of Finance

Thomas Jansson

Sveriges Riksbank - Research Division

Yigitcan Karabulut

Frankfurt School of Finance & Management; CEPR

Date Written: November 18, 2022

Abstract

Using university admission cutoffs that generate exogenous variation in college-major choices, we provide causal evidence that enrollment in a business or economics program leads individuals to invest significantly more in the stock market, earn higher portfolio returns, and ultimately accumulate higher levels of wealth later in life. Underlying these effects, beyond differences in risk-taking, innate ability, labor market outcomes, or scale effects, is the enhanced ability of business educated individuals to acquire and process economic information and make informed investment decisions. Early investments in financial literacy thus play an important role in generating higher returns that significantly alter individuals' life-cycle wealth profiles.

Keywords: Portfolio choice, financial literacy, portfolio returns, household wealth, returns to education, distribution of wealth.

JEL Classification: G11, G51, G53, I26.

Suggested Citation

Altmejd, Adam and Jansson, Thomas and Karabulut, Yigitcan, Business Education and Portfolio Returns (November 18, 2022). Available at SSRN: https://ssrn.com/abstract=4280536 or http://dx.doi.org/10.2139/ssrn.4280536

Adam Altmejd

Stockholm University - Swedish Institute for Social Research (SOFI) ( email )

Kyrkgatan 43B
SE-106 91 Stockholm
Sweden

Stockholm School of Economics - Department of Finance ( email )

SE-113 83 Stockholm
Sweden

Thomas Jansson

Sveriges Riksbank - Research Division ( email )

S-103 37 Stockholm
Sweden

Yigitcan Karabulut (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

CEPR ( email )

London
United Kingdom

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