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Ain't got no, I got life: Childhood exposure to WW2 and financial risk taking in adult life

Author

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  • Davide Bellucci
  • Giulia Fuochi
  • Pierluigi Conzo

Abstract

Childhood adverse experiences might have long-lasting effects on decisions under uncertainty in adult life. Merging the European Survey on Health, Ageing and Retirement with data on conflict events happened during Second World War, and relying on region-by-cohort variation in war exposure, we show that warfare exposure during childhood is associated with lower financial risk taking in later life. Individuals who experienced war episodes as children hold less – and are less likely to hold – stocks, but are more likely to hold life insurance, compared to non-exposed individuals. Effects are robust to the inclusion of potential mediating factors, and are tested for nonlinearity and heterogeneity. In addition, war-exposed respondents show higher resilience to financial shocks, as they react less dramatically to stock market losses. By shaping cognitive schemata, the experience of war might have increased the perception of uncertainty and uncontrollability of the environment, leading to an overestimation of risks and of the likelihood of negative events.

Suggested Citation

  • Davide Bellucci & Giulia Fuochi & Pierluigi Conzo, 2018. "Ain't got no, I got life: Childhood exposure to WW2 and financial risk taking in adult life," Carlo Alberto Notebooks 570, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:570
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    References listed on IDEAS

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    More about this item

    Keywords

    financial risk taking; risk aversion; stocks; life insurance; life experiences; Second World War.;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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