Hard to say goodbye to yesterday: war memories, patriotism, and individual investors’ investment preferences

We examine whether memories of interstate wars that occurred long ago, transmitted across generations, affect the stock investment decisions of individuals who never experienced the wars themselves. Using the Second Sino-Japanese War over 1931-1945 as a setting, we find that war memories have a significant impact on individual investors’ investment preferences today. Individual investors more affected by the war memories show a stronger preference for Chinese military stocks. The effects are stronger for individual investors residing in cities that experienced more intensive military battles in the War, for older investors who are affected by the war memories to a greater extent, and for those residing in cities with more media exposure about the war memories. Our study contributes to the literature on the role of nonpecuniary preferences, shaped by intergenerational effects, on individual investors’ economic decisions.