Religious activity, risk-taking preferences and financial behaviour: Empirical evidence from German survey data

Individual preferences with respect to risk taking play an important role in financial economic behaviour and hence in financial markets. Using German microdata, we argue that individual religiosity accounts for differences in individual's risk preferences and private financial behaviour. First, we find that adherents of the two main Christian religions in Germany (Protestants and Catholics) are less willing to take risks in general than non-religious people. We further find that Muslims in Germany are less risk-taking in general than Catholics, Protestants and non-religious people. Moreover, in explicitly considering a context-specific risk attitude, namely the willingness to take risks in financial matters, our results indicate that it is necessary to control for underlying general risk-taking preferences due to the heterogeneous attitudes of Christians and Muslims regarding financial risk taking. Second, while controlling for individual financial risk-taking preferences, we provide empirical evidence of differences in household financial behaviour between religious and non-religious individuals in Germany. Our results furthermore support the view that religious participation helps to explain different individual investment behaviour.