Single again? Asset and portfolio changes due to widowhood shock
In this paper we examine the effect of widowhood on asset trajectories and portfolio composition. In many industrialized countries, close to half of households are headed by women single, divorced, separated or widowed and therefore their ability to make financial decisions is crucial for their economic well-being as well as their dependents’. Meanwhile, research has found that women tend to be less involved with the stock market and have lower financial sophistication, leaving them out of an important way of accumulating resources via investing and saving. At the same time their higher risk aversion may have sheltered them from some of the effects of the financial crisis. For a two-adult household, the portfolio structure is likely to reflect preferences of the main financial decision maker (usually the husband). When widowhood occurs it could be that singles re-optimize their decisions according to their own preferences. We test this by examining whether there is a change in the wealth portfolio for households (over 60) that have experienced the shock of becoming widowed. Our results indicate there to be an initially statistically significant effect of widowhood on wealth that differs across wealth components and is differential for women and men. The effect disappears once we control for health insurance, but re-appears several years after the shock suggesting a differential willingness to save for women and men.
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- John Ameriks & Andrew Caplin & John Leahy, 2003. "Wealth Accumulation and the Propensity to Plan," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 1007-1047.
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"Wealth distribution within couples and financial decision making,"
LISER Working Paper Series
- Markus M. Grabka & Jan Marcus & Eva Sierminska, 2013. "Wealth Distribution within Couples and Financial Decision Making," SOEPpapers on Multidisciplinary Panel Data Research 540, DIW Berlin, The German Socio-Economic Panel (SOEP).
- Haliassos, Michael & Bertaut, Carol C, 1995. "Why Do So Few Hold Stocks?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1110-1129, September.
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