Crime and household financial decision‐making

I propose that exposure to violent crime influences individuals' portfolio choices. Consistent with this hypothesis, crime exposure is associated with reduced stock market participation and lower equity holdings. Mediation analysis suggests these findings are partially explained by both traditional factors (e.g., crime is associated with bearish beliefs about future stock returns) and non‐traditional factors (e.g., crime is associated with lower trust and individuals with lower trust are less likely to invest in equities). Further examination suggests violent crime is associated with lower bond holdings and a greater fraction of financial wealth invested in safe assets (e.g., savings and checking accounts).