About this sample
About this sample
2 pages /
2 pages /
The past decade was an era characterized by historical financial facts such as tech bubbles, housing bubbles, stock market crushes and vast corporate scandals. Therefore, as a result of this financial turmoil at the beginning of the twenty first century, literature has prompted growing interest in how young individuals, that just started to interact with credit markets and accumulate assets, have fared in the wake of Great Recession. In more detail, the dramatic shock of financial crisis in 2008 was an event that traumatized individual investors, whereas the confusion followed the crisis fertilized high levels of uncertainty that changed radically individual perception towards risk and stock markets, resulting for some investors to an even total shy away from equity investing. Even though the signs of nowadays economic recovery and improvements in financial markets may have triggered some investors to pre-crisis risk appetite and investments, empirical evidence suggests otherwise particularly for young age groups. Furthermore, according to the literature, financial well-being in early stages of life has crucial implications for lifetime wealth accumulation. However, it has been argued that today's young adults are less financially independent compared to young adults of previous generations at the same age, statement possibly captured due to the large fraction of youths who still lives with a parent. Added to that, empirical research reports that young generations have accumulated less wealth than their parents did at the same age. Therefore, this delayed financial independence among young adults has raised concerns about probable adverse effect phenomena on economic growth and aggregate consumer spending.
Morever, consumers’ choices to buy a house, take on debt or to invest in the stock market indicate expectations about future personal circumstances and about the macroeconomy many years into the future. Contrary to the traditional economic models which assume that people’s preferences are unchanged by the economic incidents they experience through life, modern literature suggests that experiences leave emotional marks on future decision making process and tend to shape individual risk tolerance more than traditional socioeconomic factors that conventional theories suggest. Thus, a general disagreement exists in literature related to the longer-term implications of macroeconomic shocks such as financial crisis on investors’ expectations and willingness to invest in the stock markets. Based on variable studies, it has been argued that major economic and political events that people go through their formative years can create distinctive sets of generational identities in terms of expectations, values and beliefs, emphasizing that recent events affect young individuals in a larger scale as they carry shorter life histories or less financial experience and knowledge. Additionally, existing research notes the importance of studying individuals that just begin to build their lifelong investment preferences and tendencies, referring typically to people in their early twenties. The purpose of the present study is to investigate whether young adults nowadays exhibit significantly different risk attitudes compared to their counterparts of previous generations due to the experience of the financial crisis during their formative years. The motivation behind this idea steams from the fact that literature outlines optimal financial decisions as one of the most crucial choices that individuals might have to face during their lifetime, as bad investment choices are highly related to pension saving and can negatively affect the quality of life when it comes to retirement. Meanwhile, previous studies have stressed the importance of investing part of individuals’ portfolio in stocks, as individuals who participate in the stock market can accumulate more wealth in contrast to those who choose not to. Considering that life expectancy is already high and continues to grow, there is particular pressure on young individuals to make sound investment decisions, meaning that younger generations should be able to support themselves longer than older generations did.
In more detail, world’s nowadays young community refers to the so-called Millennials or Generation Y. Millennials constitute a group of young adults that came of age during one of the greatest economic downturns in the global history and form a demographic group of people born approximately between 1980 and 2000. Within their formative years these individuals experienced macroeconomic trends such as depressed salaries, globalization, and rapid technological changes. For young Millennials Great Recession could be viewed as a cataclysmic event that would shape their principles for years to come as they have witnessed the devastating implications that the crisis had on their parents’ welfare. Meanwhile, older Millennials who entered the workforce were experiencing limited job opportunities and unemployment.
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