High-Crime Environment and Individual Portfolio Choice

Abstract

We study the relationship between crime victimization and financial risk taking. Using data from two different Brazilian household surveys, we show that individuals who perceive violence in their neighborhoods are more likely to participate in the stock market. We also find that individuals have different economic reaction to different kinds of crime. Being a victim of violent property crimes has a negative effect on financial savings, while victims of nonviolent property crimes are more likely to have financial savings. The effect is stronger in low-crime states. Results are estimated controlling for macroeconomic and household characteristics. To the best of our knowledge this is the first paper addressing the relationship between crime victimization experiences and stock market participation.