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Religious Activity, Risk Taking Preferences, and Financial Behaviour: Empirical Evidence from German Survey Data

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  • Anja Koebrich Leon

    ()
    (Institute of Economics, Leuphana University Lueneburg, Germany)

  • Christian Pfeifer

    ()
    (Institute of Economics, Leuphana University Lueneburg, Germany)

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    Abstract

    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 is a determinant of household willingness to take risks, since it shapes relevant individual values and norms. Controlling for overall level of general risk assessment, firstly, we find that different religious affiliations are associated with distinct financial risk-taking attitudes. Adherents to the two main Christian religions in Germany (Protestants and Catholics) are less risk-tolerant in general, but not in financial concerns. The same holds for Muslims. Further, religious involvement is associated with higher risk aversion. Secondly, we examine the extent to which religion-induced heterogeneity in risk-taking preferences actually influences investment decisions of individuals in Germany. We provide evidence suggesting that religious beliefs and religious involvement influence individual portfolio decisions.

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    Bibliographic Info

    Paper provided by University of L√ľneburg, Institute of Economics in its series Working Paper Series in Economics with number 269.

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    Length: 45 pages
    Date of creation: Apr 2013
    Date of revision:
    Handle: RePEc:lue:wpaper:269

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    Web page: http://leuphana.de/institute/ivwl.html

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    Keywords: church; religion; risk aversion; portfolio choice;

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    1. Laurence R. Iannaccone, 1998. "Corrigenda [Introduction to the Economics of Religion]," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1941-1941, December.
    2. Dorn, Daniel & Huberman, Gur, 2007. "Preferred Risk Habitat of Individual Investors," CEPR Discussion Papers 6532, C.E.P.R. Discussion Papers.
    3. Guido Tabellini, 2006. "Culture and institutions: economic development in the regions of Europe," Levine's Working Paper Archive 321307000000000466, David K. Levine.
    4. Robert Hoffmann, 2013. "The Experimental Economics Of Religion," Journal of Economic Surveys, Wiley Blackwell, vol. 27(5), pages 813-845, December.
    5. Paola Sapienza & Luigi Zingales & Luigi Guiso, 2006. "Does Culture Affect Economic Outcomes?," NBER Working Papers 11999, National Bureau of Economic Research, Inc.
    6. Hilary, Gilles & Hui, Kai Wai, 2009. "Does religion matter in corporate decision making in America?," Journal of Financial Economics, Elsevier, vol. 93(3), pages 455-473, September.
    7. Hartog, Joop & Ferrer-i-Carbonell, Ada & Jonker, Nicole, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
    8. Rachel M. McCleary & Robert J. Barro, 2006. "Religion and Economy," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 49-72, Spring.
    9. Lehrer, Evelyn L., 2008. "The Role of Religion in Economic and Demographic Behavior in the United States: A Review of the Recent Literature," IZA Discussion Papers 3541, Institute for the Study of Labor (IZA).
    10. Luc Renneboog & Christophe Spaenjers, 2012. "Religion, economic attitudes, and household finance," Oxford Economic Papers, Oxford University Press, vol. 64(1), pages 103-127, January.
    11. Laurence R. Iannaccone, 1998. "Introduction to the Economics of Religion," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1465-1495, September.
    12. Kumar, Alok & Page, Jeremy K. & Spalt, Oliver G., 2011. "Religious beliefs, gambling attitudes, and financial market outcomes," Journal of Financial Economics, Elsevier, vol. 102(3), pages 671-708.
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