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The Effects of Marriage and Divorce on Financial Investments: Learning to Love or Hate Risk?

Listed author(s):
  • Charlotte Christiansen


    (School of Economics and Management, Aarhus University and CREATES)

  • Juanna Schröter Joensen


    (Stockholm School of Economics)

  • Jesper Rangvid


    (Department of Finance, Copenhagen Business School)

We investigate how changes in marital status affect the decision to take on financial risks. As an alternative to the traditional approach of comparing different groups of investors (men and women) at each point in time, we use a difference-in-differences estimation strategy to compare how the same individual invests at different points in time (before and after marriage or divorce) compared to a benchmark investor, thereby controlling for unobserved systematic differences as well as various background characteristics. We investigate both the propensity to participate in the stock market and the propensity to invest in more risky portfolios. We find that marriage acts as a financial risk-reducer for men and as a financial risk-increaser for women, in the sense that women increase the fraction of wealth invested in stocks after marriage and decrease it after divorce, whereas men show the opposite investment behavior.

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Paper provided by Department of Economics and Business Economics, Aarhus University in its series CREATES Research Papers with number 2010-57.

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Length: 28
Date of creation: 01 Sep 2010
Handle: RePEc:aah:create:2010-57
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