The effect of subjective life expectancy on financial decisions

Abstract:  I investigate whether exposure to natural disasters and mass
shootings influences subjective life expectancy and affect
financial decisions. I show that being exposed to natural disasters
and mass shootings significantly decreases an individual’s subjective
life expectancy relative to life table probabilities. Lifespan
optimists become less optimistic with a disaster experience and
lifespan pessimists do not react at all. I find that disasters
monotonically reduce the share of financial assets in equities and
non-government bonds for increasing levels of lifespan optimism. When
unrelated to life expectancy, disaster experiences do not matter. My findings
provide evidence for the existence of an expectations channel for
experiences to affect financial decisions.