← Search

Review of Finance Vol. 22 No. 3 2018

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

Sandra E. Black1; Paul J. Devereux2; Petter Lundborg3; Kaveh Majlesi4

1 University of Texas, Austin, NHH, IZA, and NBER · 2 School of Economics and Geary Institute, University College Dublin, CEPR, and IZA · 3 Lund University, IZA, and CED Lund · 4 Lund University, Knut Wicksell Centre for Financial Studies and IZA

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.

DOI
10.1093/rof/rfy005
Volume
22
Issue
3
Pages
951-975
Language
en
Sources
crossref bibtex:phds-export.bib openalex

Cite