The effect of lifespan expectations on financial decisions

Abstract: I investigate the relationship between lifespan expectations and household investments into risky financial assets. To credibly establish this relationship, I use natural disasters and mass shootings experiences, in the county of the household, their social network and by geographic distance, and show that exposure to such experiences makes households more pessimistic. Using these experiences as an instrument, I document a robust negative relationship between lifespan pessimism and investments into risky assets. These results highlight the role of lifespan expectations in explaining household investments in risky financial markets.