Labor market experiences and portfolio choice
Subject
Finance
Publishing details
Social Sciences Research Network
Publication Year
2014
Abstract
Labor market experiences are a natural candidate for explaining heterogeneity in portfolio choice. However, identifying their impact is challenging, because unobservables can influence the events and circumstances people experience. We use plausibly exogenous variation in labor market conditions during the Finnish Great Depression in the early 1990s to trace the long-run impact of labor market experiences on portfolio choice. The results suggest that workers who experienced adverse labor market conditions are less likely to invest in various types of risky assets. This pattern is robust to a number of controls, including wealth and income, and it also is pervasive across different types of workers. The consequences of labor market experiences span generations: individuals whose parents have experienced adverse labor market conditions also avoid risky investments.
Keywords
Portfolio choice; Stock market participation; Experiences; Unemployment
Series
Social Sciences Research Network
Available on ECCH
No
