Individuals who were exposed to the Finnish Great Depression invest more cautiously

Researchers from Aalto University School of Business and BI Norwegian Business School examined the effect that the Finnish Great Depression of the early 1990s had on individual investment behaviour.

The study showed that people who experienced a significant increase in unemployment in their profession or region were less likely to invest in risky stocks and equity funds in 2005. The recession decreased propensity to invest in risky securities, even in cases when the depression had not directly decreased the investor's wealth.

Unemployment experienced by family members and neighbours also had a similar effect on investment decision-making.

'A surprising wave of unemployment in an individual's immediate circle still affected risk-taking 15 years later, and this impact was transferred from one generation to another,' says Assistant Professor Elias Rantapuska as he explains the research results.

The target of the study was Finns in the workforce who were born in 1950–1965. The research was performed by analysing data from Statistics Finland and the Finnish Tax Administration.

The study was co-authored with Professor Samuli Knüpfer from BI Norwegian Business School and Research Fellow Matti Sarvimäki from Aalto University School of Business and VATT Institute for Economic Research.

The study has been accepted for publication in the prestigious Journal of Finance. The article

Further information:

Assistant Professor Elias Rantapuska
Tel. +358 40 353 8419
[email protected]

Aalto University School of Business