Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: In this paper, the impact of divorce ­­­on individual financial behavior is empirically examined. Evidence that divorcing individuals increase their saving rates before the divorce is presented. This may be seen as a response of the increase in background risk. After the divorce, negative divorce effects on individual saving rates and risky shares are established, which may lead to disparities in wealth accumulation possibilities between married and divorced. Women are, on average, shown to not adjust their precautionary savings to the same extent as men before the divorce. I also provide tentative evidence that women reduce their financial risk-taking more than men after a divorce. This could potentially be a result of inequalities in financial positions or an adjustment towards individual preferences.

Keywords: asset allocation; divorce; financial risk taking; saving behavior; risky share

JEL-codes: D01; D14; G02; G11; J12; J16

37 pages, April 22, 2015

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