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The authors investigate whether individual experiences of macroeconomic shocks affect financial risk taking, as often suggested for the generation that experienced the Great Depression. Using data from the Survey of Consumer Finances from 1960-2007, they find that individuals who have experienced low stock-market returns throughout their lives so far report lower willingness to take financial risk, are less likely to participate in the stock market, invest a lower fraction of their liquid assets in stocks if they participate, and are more pessimistic about future stock returns.
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