NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Sandra E. Black, Paul J. Devereux, Petter Lundborg, Kaveh Majlesi

NBER Working Paper No. 21043
Issued in March 2015
NBER Program(s):Asset Pricing, Labor Studies

We investigate whether acquiring more education when young has long-term effects on risk-taking behavior in financial markets and whether the effects spill over to spouses and children. There is substantial evidence that more educated people are more likely to invest in the stock market. However, little is known about whether this is a causal effect of education or whether it arises from the correlation of education with unobserved characteristics. Using exogenous variation in education arising from a Swedish compulsory schooling reform in the 1950s and 1960s, and the wealth holdings of the population of Sweden in 2000, we estimate the effect of education on stock market participation and risky asset holdings. We find that an extra year of education increases stock market participation by about 2% for men but there is no evidence of any positive effect for women. More education also leads men to hold a greater proportion of their financial assets in stocks and other risky financial assets. We find no evidence of spillover effects from male schooling to the financial decisions of spouses or children.

download in pdf format
   (257 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21043

Users who downloaded this paper also downloaded* these:
Black, Devereux, Lundborg, and Majlesi w21332 On the Origins of Risk-Taking
Zidar w21035 Tax Cuts For Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment
Black, Devereux, Lundborg, and Majlesi w21409 Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth
Taylor w21039 Credit, Financial Stability, and the Macroeconomy
Hastings, Madrian, and Skimmyhorn w18412 Financial Literacy, Financial Education and Economic Outcomes
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us