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Learning to Take Risks? : The Effect of Education on Risk-Taking in Financial Markets

Lundborg, Petter LU ; Majlesi, Kaveh LU ; E. Black, Sandra and Devereux, Paul J. (2018) In Review of Finance
Abstract
We investigate whether acquiring more primary education has long-term effects on risk-taking behavior in financial markets. Using exogenous variation in education from a compulsory schooling change combined with wealth data for the Swedish population, we estimate the effect of education on stock market participation and on the share of financial wealth invested in stocks, conditional on participation. For men, an extra year of education increases market participation by two percentage points and the share of financial wealth allocated to stocks by 10%. We find suggestive evidence that greater financial wealth is a potential channel through which education increases participation, consistent with the existence of fixed costs. Lower risk... (More)
We investigate whether acquiring more primary education has long-term effects on risk-taking behavior in financial markets. Using exogenous variation in education from a compulsory schooling change combined with wealth data for the Swedish population, we estimate the effect of education on stock market participation and on the share of financial wealth invested in stocks, conditional on participation. For men, an extra year of education increases market participation by two percentage points and the share of financial wealth allocated to stocks by 10%. We find suggestive evidence that greater financial wealth is a potential channel through which education increases participation, consistent with the existence of fixed costs. Lower risk aversion is a potential channel through which education increases the stock share. The reform has less effect on female schooling attainment and there is no evidence that this additional education affects women's asset allocation. There is no evidence of spillovers to children. (Less)
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organization
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Contribution to journal
publication status
in press
subject
in
Review of Finance
publisher
Oxford University Press
ISSN
1573-692X
language
English
LU publication?
yes
id
296e1bbb-e90d-4e86-a8b8-5f798a92da80
date added to LUP
2018-01-31 11:04:40
date last changed
2018-05-29 10:39:03
@article{296e1bbb-e90d-4e86-a8b8-5f798a92da80,
  abstract     = {We investigate whether acquiring more primary education has long-term effects on risk-taking behavior in financial markets. Using exogenous variation in education from a compulsory schooling change combined with wealth data for the Swedish population, we estimate the effect of education on stock market participation and on the share of financial wealth invested in stocks, conditional on participation. For men, an extra year of education increases market participation by two percentage points and the share of financial wealth allocated to stocks by 10%. We find suggestive evidence that greater financial wealth is a potential channel through which education increases participation, consistent with the existence of fixed costs. Lower risk aversion is a potential channel through which education increases the stock share. The reform has less effect on female schooling attainment and there is no evidence that this additional education affects women's asset allocation. There is no evidence of spillovers to children.},
  author       = {Lundborg, Petter and Majlesi, Kaveh and E. Black, Sandra and Devereux, Paul J.},
  issn         = {1573-692X},
  language     = {eng},
  publisher    = {Oxford University Press},
  series       = {Review of Finance},
  title        = {Learning to Take Risks? : The Effect of Education on Risk-Taking in Financial Markets},
  year         = {2018},
}