Review of Quantitative Finance and Accounting

, Volume 53, Issue 3, pp 773–810 | Cite as

Afraid of the stock market

  • Yuree LimEmail author
  • Kyoung Tae Kim
Original Research


This study demonstrates the way investors psychological traits influence their financial behaviors in the stock market. Results from the Health and Retirement Study show that anxious individuals are reluctant to participate in the stock market and have a lower level of risky investments. Anxiety’s effect is more pronounced for less educated investors, implying that anxiety about the unknown stock market drives this effect. Analysis of individual traumatic experiences as instruments for the current anxiety level suggests a causal effect of anxiety on investment decisions.


Anxiety Stock market participation Investment decision Asset allocation 

JEL Classification

G30 D12 D14 



We thank Anup Agrawal, David Cicero, Guo Kai, Jim Ligon, Shawn Mobbs, Charles Noussair, Duong Katie Pham and Harris Schlesinger for useful comments. Special thanks are due to Cheng-Few Lee (the editor) and to anonymous referees for detailed comments and helpful suggestions.


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© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of FinanceUniversity of Wisconsin-La CrosseLa CrosseUSA
  2. 2.Department of Consumer SciencesUniversity of AlabamaTuscaloosaUSA

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