Wednesday, 12 February 2014

Anti-Semitism and the Stock Market

Just met two clever PhD students in Berkeley, where I am spending the week. They - Francesco D'Acunto and Michael Weber, together with co-author Marcel Prokopczuk -- are putting Nico Voigtländer's and my data to good use. The abstract is:
We propose historical anti-Jewish sentiment as a proxy for distrust in nancial
markets. Households in German counties where Jews were persecuted the most
as far back as in the Middle Ages are less likely to invest in stocks today. A
one-standard-deviation increase in historical anti-Jewish violence leads to a 7.5% to
12% drop in the average stock market participation. For identi cation, we exploit
the forced migrations of Ashkenazi Jews out of the Rhine Valley after the 11th
century. The distance of a county from the Rhine Valley serves as an instrument
for the existence of a Jewish community during the Black Death (1349) and hence
the early emergence of anti-Jewish sentiment. Results are similar when we use the
votes for the Nazi party as a proxy for anti-Jewish sentiment. The magnitude of
the e ect neither changes from 1984 until 2011 nor across cohorts.
The paper is here. They found some amazing data on Jewish presence in retail finance in the 19th century... I like and believe their result, but I am not quite sure how I should think about it as a causal story. 

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