Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/215432
Authors: 
Laudenbach, Christine
Loos, Benjamin
Pirschel, Jenny
Wohlfart, Johannes
Year of Publication: 
2020
Series/Report no.: 
SAFE Working Paper No. 272
Abstract: 
We use data from a German online brokerage and a survey to show that retail investors sharply reduce risk-taking in response to nearby firm bankruptcies, which are not predictive of returns. The e.ects on trading are spatially highly concentrated, immediate and not persistent. They seem to operate through more pessimistic expected returns and increased risk aversion and do not reflect wealth e.ects or changes in background risks. Investors learn about bankruptcies through immediate coverage in local newspapers. Our findings suggest that non-informative local experiences that make downside risks of stock investment more salient contribute to idiosyncratic short-term fluctuations in trading.
Subjects: 
Individual investors
risk-taking
trading
experiences
JEL: 
D14
G11
Document Type: 
Working Paper

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