People who lose a parent during childhood are significantly less likely to invest in the stock market later in life.
The study, conducted by Professor Louis Nguyen, alongside Professors Yibing Wang and Tarik Driouchi (King’s Business School), found that early-life trauma can have lasting effects on financial decision making, but only in certain cultural contexts.
The researchers analysed household survey data from the US, China, South Korea, England, 21 European countries and Israel. They found that in individualist societies, such as the United States and the UK, the loss of a parent in childhood was strongly linked to lower participation in the stock market.
However, this pattern was far less evident in collectivist cultures, such as China and South Korea, where strong familial and community ties often provide emotional and financial support during times of personal crisis.
According to the study, two key mechanisms explain the cultural divide. First, individuals in collectivist societies are more likely to benefit from a ‘cushion’ of financial support from family and social networks after traumatic events. This can reduce the fear of financial risk-taking in adulthood.
Second, those in more individualistic cultures may be more inclined to internalise early trauma, leading to long-term caution and avoidance of perceived financial risks such as stock market investing.
“Stock market participation is more than just a personal finance choice, it shapes household welfare, capital allocation, and long-term economic growth,” the researchers said. “Our findings show that culture fundamentally influences how personal experiences like bereavement translate into financial behaviour and economic engagement.”
The study highlights the wider implications of this pattern, noting that lower stock ownership can affect everything from household wealth to company financing and broader economic performance.
The researchers suggest that targeted policies, such as survivor benefits, child welfare programmes, and trauma-informed interventions, could help mitigate the long-term financial impact of childhood bereavement. In doing so, they argue, governments could foster greater financial inclusion, especially in societies where individuals are expected to manage financial risk largely on their own.
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