--- title: "Communism and Financial Markets: Laudenbach, Malmendier & Niessen-Ruenzi (2026)" description: >- Distilled: East Germans invest less in stocks and hold more negative attitudes toward capital markets decades after reunification, with the gap explained by lasting adherence to anti-capitalist ideology shaped by personal experiences under communism. J. Finance 2026, paywalled. Ten core results with source locators, datasets used, the identification strategy, and the empirical specifications. sidebar: label: Laudenbach-Malmendier-Niessen-Ruenzi 2026 order: 1 tags: [paper-summary, household-finance, stock-market-participation, ideology, political-economy, panel-regression, logit-regression, peer-reviewed, unreplicated, data:bilendi-survey, data:bank-proprietary, data:online-broker] paper: authors: Christine Laudenbach, Ulrike Malmendier, Alexandra Niessen-Ruenzi authorList: - { family: Laudenbach, given: Christine, orcid: "0000-0002-2452-5683", affiliation: "SAFE and Goethe University" } - { family: Malmendier, given: Ulrike, orcid: "0000-0002-2786-4365", affiliation: "University of California, Berkeley" } - { family: Niessen-Ruenzi, given: Alexandra, affiliation: "University of Mannheim" } year: 2026 venue: The Journal of Finance 81(2), April 2026, 1103-1145 venueShort: J. Finance 2026 doi: 10.1111/jofi.70006 jel: codes: [G11, G51, D14] assignedBy: claude-opus-4-8 date: 2026-06-05 topics: - Financial Markets and Investment Strategies - Household Finance and Stock Market Participation - Political Economy and Ideology dataAccess: proprietary-confidential outcome: - stock market participation (extensive and intensive margin) - anti-capitalist attitudes toward capital markets - portfolio returns and portfolio characteristics outcomeClass: [household-finance] license: >- Paywalled. Crossref license[]: content-version vor, URL http://onlinelibrary.wiley.com/termsAndConditions#vor, delay-in-days 0, start 2025-12-25. No Creative Commons licence. licenseShort: paywalled access: paywalled machineAccess: blocked-paywall (Wiley site; confirmed paywalled via Crossref DOI metadata 2026-06-01) redistribution: extract-only resultsCount: 10 citedByCount: 1 methods: role: applies-method family: reduced-form-causal buildsFrom: [panel-regression, logit-regression, difference-in-differences, matching] identification: natural-experiment contributionType: [new-fact, new-data] mechanisms: [behavioral-bias] introducesData: true scope: region: Germany (East vs. West) assetClass: household equity (stocks, equity funds, ETFs) period: 2004-06..2023-06 frequency: mixed dataType: [survey, administrative, market] granularity: [individual] n: "9,695 survey respondents; 326,437 bank customers; 839,292 investor-years (broker)" findings: - { ref: R1, outcome: stock market participation (extensive and intensive margin), metric: pp-effect, value: "Survey: 27.6 pp gap (East 26.9% vs. West 35.5%); bank: 25.2 pp gap; broker: 27.7 pp gap", direction: negative, vsBenchmark: "East vs. West Germans across three independent data sets" } - { ref: R2, outcome: stock market participation (extensive and intensive margin), metric: coefficient, value: "Survey: -0.026*** (SE 0.009), effect size 8.4%; bank: -0.007*** (SE 0.001), 7.7%; broker: -0.156*** (SE 0.002), 19.1%", direction: negative, vsBenchmark: "residual gap after full set of demographic and financial controls" } - { ref: R3, outcome: stock market participation (extensive and intensive margin), metric: coefficient, value: "Survey movers: -0.072*** (SE 0.026) all Germans; -0.075** (SE 0.029) West Germans only", direction: negative, vsBenchmark: "East movers living in West vs. West Germans in same environment" } - { ref: R4, outcome: anti-capitalist attitudes toward capital markets, metric: pp-effect, value: "Survey: -1.9 pp financial firms, -1.9 pp U.S. firms, +5.9 pp Chinese firms; broker: -4.9 pp financial firms***, -1.9 pp U.S. firms***, +0.4 pp East European firms***", direction: mixed, vsBenchmark: "capitalist vs. formerly communist firm stock holdings, East vs. West" } - { ref: R5, outcome: stock market participation (extensive and intensive margin), metric: coefficient, value: "Reject stocks: -0.103*** (SE 0.004); Investing immoral: -0.070*** (SE 0.006); Abolish capitalism: -0.020*** (SE 0.005)", direction: negative, vsBenchmark: "within East Germany, anti-capitalist attitude quartiles vs. neutral" } - { ref: R6, outcome: stock market participation (extensive and intensive margin), metric: coefficient, value: "Pollution: +0.058*** (SE 0.009); No West-TV: +0.090*** (SE 0.016); Renamed city: -0.169*** (SE 0.010); Olympic gold (pop-weighted): -0.044*** (SE 0.006)", direction: mixed, vsBenchmark: "negative vs. positive GDR experience proxies within East Germany" } - { ref: R7, outcome: stock market participation (extensive and intensive margin), metric: coefficient, value: "High GDR life standard: -0.032*** (SE 0.008); Wishing GDR back: -0.062*** (SE 0.016); Positive GDR memories: -0.050*** (SE 0.019)", direction: negative, vsBenchmark: "positive vs. neutral GDR memories within East German survey subsample" } - { ref: R8, outcome: portfolio returns and portfolio characteristics, metric: alpha, value: "CAPM alpha: -0.082** (SE 0.040); FF3 alpha: -0.070* (SE 0.040); FF4 alpha: -0.099** (SE 0.041) per month", direction: negative, vsBenchmark: "long East short West portfolio vs. zero alpha (CAPM, FF3, FF4)" } - { ref: R9, outcome: portfolio returns and portfolio characteristics, metric: coefficient, value: "Passive investments: -0.017*** (SE 0.002), 44.7% lower relative to baseline; number of assets: -33.1%; fund fees: +3.78% higher", direction: negative, vsBenchmark: "East vs. West German investors, same broker controls" } - { ref: R10, outcome: stock market participation (extensive and intensive margin), metric: t-stat, value: "East 66.7% vs. West 68.2%; t-statistic: 0.34, not significant", direction: none, vsBenchmark: "pre-1924 historical bank data, before Germany's division" } resultType: new-finding relatesTo: - { cite: "Fuchs-Schundeln & Haliassos (2021)", relation: extends, note: "prior paper documents the East-West participation gap; this paper shows a significant residual ~10 pp gap with richer controls and explains it via ideology" } - { cite: "Malmendier & Nagel (2011)", doi: '10.1093/qje/qjq004', relation: builds-on, note: "experience-effects framework: lifetime returns shape stock market participation; this paper applies the logic to ideological rather than financial experiences" } - { cite: "Bursztyn & Cantoni (2016)", doi: '10.1162/rest_a_00522', relation: builds-on, note: "Western TV access in East Germany as a quasi-exogenous instrument; this paper adopts the same proxy for negative GDR experience" } - { cite: "Fuchs-Schundeln & Schundeln (2020)", doi: "10.1257/jep.34.2.172", relation: cites, note: "review of long-term effects of communism in Eastern Europe; provides the broader context for the East-West comparison" } - { cite: "Becker, Mergele & Woessmann (2020)", doi: "10.1257/jep.34.2.143", relation: tests, note: "questions whether German reunification is a clean natural experiment; this paper addresses the critique with within-East variation and movers analysis" } openQuestions: - "Whether the findings extend beyond Germany to other post-communist transitions and whether the speed of convergence differs by country (pp. 1142-1143)." - "What factors explain faster vs. slower convergence to market-economy norms across formerly communist countries; the role of (re-)framing of ideology is left as future work (p. 1143)." - "Whether anti-capital-market doctrines beyond communism drive similar participation gaps in Western countries; broader applicability is stated but not tested (p. 1142)." replicationCode: status: available proposedVocab: - { axis: topic, term: stock-market-participation, def: "Whether a household or individual holds stocks, equity funds, or ETFs (extensive margin) or the portfolio share allocated to equity (intensive margin).", aliases: [equity-participation, household-equity] } - { axis: topic, term: ideology, def: "Persistent adherence to a political-economic belief system (here anti-capitalist/communist doctrine) that shapes financial behavior decades after exposure.", aliases: [political-ideology, ideological-priming] } - { axis: topic, term: political-economy, def: "Research linking political institutions, ideology, or governance to economic outcomes at the individual or aggregate level.", aliases: [political-economics] } extraction: - by: paper-distiller (claude-sonnet-4-6) date: 2026-06-01 role: extracted note: "Full text read (pp. 1103-1146); ten results extracted from the PDF. Not human-verified. Not reproduced. Replication code is referenced in the paper (Supporting Information) but has not been run here." - by: paper-verifier (claude-sonnet-4-6) date: 2026-06-01 role: verified note: "Locators and reported magnitudes re-checked against the source PDF; all 10 result rows confirmed correct. Fixed two errors: (1) topics field contained two unrelated placeholder topics ('Climate Change Communication and Perception', 'Media Influence and Health') replaced with accurate topics; (2) colorful adverb 'strikingly' removed from R1 description per house style." - by: paper-distiller (claude-sonnet-4-6) date: 2026-06-03 role: extracted note: >- Added classification axes (identification, contributionType, mechanisms, introducesData, data-scope) from a fresh PDF read; existing results and sections unchanged. - by: paper-verifier (claude-sonnet-4-6) date: 2026-06-03 role: verified note: >- Classification axes (identification, contributionType, mechanisms, introducesData, data-scope) re-checked against the source PDF; all axes confirmed correct - natural-experiment identification matches primary German division design, new-fact and new-data contribution types supported by three novel data sources (abstract p.1103), behavioral-bias mechanism maps to belief-distortion alias for ideology channel (Section III), introducesData true per fielded Bilendi survey + proprietary bank and broker data, and all scope fields match Table I counts and dataset descriptions. - by: paper-distiller (claude-sonnet-4-6) date: 2026-06-04 role: extracted note: >- Added the effectiveness axis (findings[] per Core-results row, resultType) built from the page's already-verified Core-results table and relatesTo edges; existing results and sections unchanged. - by: paper-verifier (claude-sonnet-4-6) date: 2026-06-04 role: verified note: >- Effectiveness axis (findings[] values/direction, resultType) re-checked against the source PDF; all 10 findings entries confirmed correct - magnitudes match Table III (R1/R2), Table IV (R3), Table V (R4), Table VI (R5), Table VII (R6), Table VIII (R7), Table IX Panel A (R8) and Panel B (R9), and pp. 1116-1117 text (R10); directions and resultType new-finding are defensible given the ideology-mechanism finding is genuinely new with no prior to confirm or overturn. licenceVerification: - source: Crossref REST API works/10.1111/jofi.70006 checked: 2026-06-01 by: paper-distiller (claude-sonnet-4-6) found: "license[]: (1) content-version=vor, URL=http://onlinelibrary.wiley.com/termsAndConditions#vor, delay-in-days=0, start=2025-12-25; (2) content-version=tdm, URL=http://doi.wiley.com/10.1002/tdm_license_1.1, delay-in-days=0, start=2025-12-25. No Creative Commons licence found." rightsSignalConflict: false --- **What this is.** The paper's core results, the identification strategy, and the empirical specifications with enough detail to know what it found and how, without reading all 43 pages. To replicate or extend, read the full source at the [original](https://doi.org/10.1111/jofi.70006). ## TL;DR Using three independent data sets (a representative survey of 9,695 Germans, proprietary bank records for 326,437 customers, and brokerage data for 230,229 retail investors), the paper shows that East Germans are 25-28% less likely to participate in the stock market than West Germans, and that a significant gap of roughly 10% persists after controlling exhaustively for wealth, income, financial literacy, trust, social capital, and risk aversion. Where prior work such as Fuchs-Schundeln and Haliassos (2021) documents the East-West participation gap, this paper shows that a residual gap survives richer controls and traces it to ideology. The paper argues that the gap is explained by lasting adherence to the GDR's anti-capitalist ideology: East Germans with stronger positive experiences of life under communism (proxied by geography-based variation and by survey memories) show greater stock-market aversion, while those with more negative experiences (e.g., living in heavily polluted areas or areas without Western TV access) invest more. The financial cost is real: East German investors earn 7-11 basis points per month less, hold fewer assets, pay higher fund fees, and hold less diversified portfolios than comparable West Germans. ## Core results Magnitudes and significance are as reported; `**`/`***` = 5%/1%. Locators point into the source PDF. | # | Result | Locator | Magnitude | |---|---|---|---| | R1 | Raw East-West gap in stock market participation is large and consistent across all three data sets | Table III, pp. 1119-1120; Table II, p. 1114 | Survey: 27.6% gap (East 26.9% vs. West 35.5%); bank: 25.2% gap; broker: 27.7% gap | | R2 | A significant residual gap of ~10% remains after controlling for the full set of demographic and financial variables | Table III col (2) all panels, pp. 1119-1120 | Survey: -0.026\*\*\* (SE 0.009), effect size 8.4%; bank: -0.007\*\*\* (SE 0.001), 7.7%; broker data: -0.156\*\*\* (SE 0.002), 19.1% | | R3 | East Germans who moved to West Germany after Reunification and now live in the same economic environment as West Germans still invest significantly less | Table IV col (1)-(2), p. 1125 | Survey movers: -0.072\*\*\* (SE 0.026) on all Germans, -0.075\*\* (SE 0.029) restricting to West Germans only | | R4 | East Germans are less willing to buy "capitalist" stocks (financial firms, U.S. firms) and more willing to buy stocks of formerly communist countries | Table V, p. 1130 | Survey: -1.9 pp for financial firms (4.7% relative gap), -1.9 pp for U.S. firms (5.5% gap); +5.9 pp for Chinese firms (23.5% gap); broker data: -4.9 pp financial firms\*\*\*, -1.9 pp U.S. firms\*\*\*, +0.4 pp East European firms\*\*\* | | R5 | Within East Germany, anti-capitalist and anti-stock-market attitudes directly predict lower stock market participation | Table VI, p. 1132 | "I generally reject stocks": -0.103\*\*\* (SE 0.004); "Investing in stocks is immoral": -0.070\*\*\* (SE 0.006); "Capitalism should be abolished": -0.020\*\*\* (SE 0.005) | | R6 | Negative GDR experiences (pollution, no Western TV access) predict higher stock market participation; positive experiences (renamed showcase cities, Olympic gold medal wins) predict lower participation | Table VII, p. 1136 | Pollution: +0.058\*\*\* (SE 0.009); No West-TV: +0.090\*\*\* (SE 0.016); Renamed city: -0.169\*\*\* (SE 0.010); Olympic gold (population-weighted): -0.044\*\*\* (SE 0.006) | | R7 | Survey-based GDR memories directly link to stock market participation in the expected direction | Table VIII, p. 1138 | High GDR life standard: -0.032\*\*\* (SE 0.008); Wishing GDR back: -0.062\*\*\* (SE 0.016); Positive GDR memories: -0.050\*\*\* (SE 0.019) | | R8 | East German investors earn lower risk-adjusted portfolio returns than West Germans | Table IX Panel A, p. 1140 | CAPM alpha (equal-weighted long East, short West): -0.082\*\* (SE 0.040); FF3 alpha: -0.070\* (SE 0.040); FF4 alpha: -0.099\*\* (SE 0.041) per month | | R9 | East German investors hold significantly fewer passive investments, fewer assets, pay higher fund fees, and hold less diversified portfolios | Table IX Panel B, p. 1141 | Passive investments: -0.017\*\*\* (SE 0.002), 44.7% lower relative to baseline; fund fees: +3.78% higher (col 3); number of assets: -33.1% (col 2) | | R10 | The stock market participation gap did not exist before the separation of Germany (1920-1924 bank data), ruling out pre-existing persistent differences | §II.A, p. 1116 | Historical stock-market participation: East 66.7% vs. West 68.2%; difference not statistically significant (t-statistic: 0.34) | **Overall (paper's conclusion).** Exposure to anti-capitalist ideology can exert lasting influence on individual investment behavior for years and even decades. Individuals who remember life in the GDR positively are more likely to continue holding anti-capitalist views and to refrain from stock market investment, with adverse financial consequences. Negative personal experiences under communism reverse the effect. These findings suggest that ideology, not only financial experience, shapes long-run investment behavior, and offer a micro-level foundation for macroeconomic growth differentials between formerly communist and capitalist countries. The broader context for this East-West comparison is the review of the long-term effects of communism in Eastern Europe by Fuchs-Schundeln and Schundeln (2020). ## Theory / model The paper has no formal model. The theoretical framework is the **emotional-tagging hypothesis** from cognitive science, applied to ideological formation. The core logic is as follows. Emotionally charged stimuli are encoded more strongly in long-term memory. The valence (positive vs. negative) of an emotional context during an experience shapes the memory trace: positive emotions create favorable associations with the context, and negative emotions create unfavorable ones (Richter-Levin and Akirav, 2003; Dolan, 2002). This extends the experience-effects framework of Malmendier and Nagel (2011), in which lifetime returns shape stock market participation, to ideological rather than financial experiences. Applied to the GDR setting, individuals who lived under communism with positive experiences are predicted to (i) form stronger positive associations with the communist ideology and its anti-capitalist stance, (ii) retain these associations in long-term memory, and (iii) carry them into financial behavior decades later. Those with negative experiences are predicted to reject the ideology and, as a result, embrace capitalist financial markets more readily. The tested hypothesis is: - **H1 (positive tagging):** East Germans with more positive experiences under communism show greater adherence to anti-capitalist views and lower stock market participation. - **H2 (negative tagging):** East Germans with more negative experiences under communism show less adherence to anti-capitalist views and higher stock market participation. - **H3 (mechanism):** The link from experience to investment runs through ideological attitudes: anti-capitalist beliefs (toward stocks specifically and capitalism generally) mediate the effect on stock market participation. **Identification strategy.** The paper uses three complementary identification approaches: 1. **East-West comparison** (Sections II-III): the quasi-natural experiment of Germany's post-WWII division and 1990 reunification. Pre-trends are addressed using historical 1920-1924 bank data showing no pre-existing gap. Movers (East Germans who relocated to West Germany after Reunification) are used to rule out contemporaneous environmental confounders, addressing the concern raised by Becker, Mergele, and Woessmann (2020) that reunification may not be a clean natural experiment. 2. **Within-East survey variation** (Section III.B): variation in anti-capitalist attitudes among East Germans, related directly to stock market participation via logit regressions. 3. **Within-East geographic variation** (Section IV): four geography-based, predetermined (pre-reunification) proxies for positive or negative GDR experiences - pollution levels (negative), access to West German TV (negative for lack thereof, following Bursztyn and Cantoni (2016), who use Western TV access in East Germany as a quasi-exogenous proxy), living in GDR renamed showcase cities (positive), and proximity to Olympic gold medal winners (positive) - are used as quasi-exogenous instruments for emotional tagging. These proxies are orthogonal to current economic conditions and to each other (Internet Appendix Table IA.XIV). ## Method The paper applies logit regression as the primary estimator for all stock market participation outcomes. For portfolio characteristics and returns, OLS is used. The estimating framework is described in Section II.B (p. 1118). **Main logit specification (equation 1, p. 1118):** $$ P(y_{it} = 1 \mid \text{East}_i, x_{it}, z_{c(i),t}, v_t) = \Phi(\alpha + \beta \cdot \text{East}_i + \gamma' x_{it} + \delta' z_{c(i),t} + v_t) $$ where: - $$y_{it}$$ = 1 if investor $$i$$ participates in the stock market in year $$t$$ - $$\text{East}_i$$ = 1 if investor lives in East Germany (former GDR) - $$x_{it}$$ = individual-level controls (gender, age, marital status, risk tolerance, wealth, income, financial literacy, trust, social capital, return expectations, peer effects; data-set specific) - $$z_{c(i),t}$$ = municipality-level controls (in broker data: number of bank branches, population, real estate wealth, share with high-school degree, county GDP, number of local firms, Facebook social connectedness index) - $$v_t$$ = year fixed effects (broker data only) - $$\Phi(\cdot)$$ = logistic CDF (the paper's notation for the logit link function) Coefficients are reported as **average marginal effects**. Standard errors are clustered by municipality in the survey and bank data; by broker customer in the broker data. The `builds-on` technique primitives used are `panel-regression` (OLS for returns and portfolio characteristics), `logit-regression` (the logit AME specification for participation), `difference-in-differences` (East-West comparison before/after, with matched-city and Berlin sub-samples), and `matching` (characteristics-matched cities: Eisenach vs. Bad Hersfeld, broker data col (4) Table III Panel C). **Alternative estimation.** The paper also uses Conley (1999, 2008) spatial HAC standard errors with a 50 km distance cutoff and a two-year linear Bartlett window (§II.C) to address spatial and serial autocorrelation in the broker data. Results are qualitatively unchanged. ## Empirical specifications ### Baseline East-West participation gap (R1, R2) Three separate logit regressions are run on each of the three data sets (Table III, pp. 1119-1120): $$ P(\text{stock market participant} = 1) = \Phi(\alpha + \beta \cdot \text{East}_i + \text{controls}) $$ - **Survey data (Panel A):** N = 9,695; cross-section, 2023; SE clustered by municipality. Controls include gender, age, marital status, wealth (8-level), income (6-level), education (4-level), trust, risk tolerance (1-7), financial literacy (0-3), familiarity with stocks, peer effects, social capital (two measures), return expectations. Berlin excluded. - **Bank data (Panel B):** N = 326,437; cross-section, 2019; SE clustered by municipality. Controls include gender, age, marital status, employment, wealth, income, risk tolerance, product ownership (consumer credit, retirement savings plans, credit card, mortgage, savings plans), number of consultations. - **Broker data (Panel C):** N = 839,292 investor-years, June 2004-December 2012; SE clustered by broker customer. Controls include investor age, marital status, portfolio value, time account open, municipality controls (see above); year FE. Robustness variants: (i) Berlin-only subsample (col 3, Panel C), (ii) matched cities Eisenach-Bad Hersfeld (col 4, Panel C, N = 574), (iii) restricting to active bank accounts (col 3, Panel B), (iv) single-stock holding as dependent variable (col 4, Panel B), (v) HAC standard errors. ### Movers specification (R3) $$ P(\text{stock market participant} = 1) = \Phi(\alpha + \beta_1 \cdot \text{Mover}_i + \beta_2 \cdot \text{East}_i + \text{controls}) $$ where $$\text{Mover}_i$$ = 1 if respondent moved from East to West Germany after 1989 and lived in GDR for at least 10 years. The $$\text{East}_i$$ coefficient is set to zero in columns (2) and (4) (West-Germans-only subsample). Estimated on survey data (col 1-2, N = 9,695/4,409) and a bank survey subsample (col 3-4, N = 241/198). Table IV, p. 1125. ### Stock type preference: "communist" vs. "capitalist" stocks (R4) $$ P(\text{hold stock type } k = 1) = \Phi(\alpha + \beta \cdot \text{East}_i + \text{controls}) $$ run separately for financial-industry stocks, U.S.-company stocks, Chinese stocks, and East European stocks. Survey: willingness to buy (Table V Panel A, p. 1130); bank data: actual holdings conditional on participating (N = 29,768, Table V Panel B); broker data: portfolio share (N = 611,410, Table V Panel C). Year FE included in broker data. SE clustered by municipality (survey, bank) or broker customer (broker data). ### Anti-capitalist attitudes and participation (R5) $$ P(\text{stock market participant} = 1) = \Phi(\alpha + \beta \cdot \text{Attitude}_{qi} + \text{controls}) $$ estimated separately for each of nine attitude survey questions on four-point Likert scales, restricted to the East German survey subsample (N = 5,286). Questions span (i) anti-stock-market attitudes (Panel A), (ii) anti-capitalist attitudes (Panel B), and (iii) pro-capitalist attitudes (Panel C). Table VI, p. 1132. SE clustered by municipality. ### Geographic experience proxies and participation (R6) $$ P(\text{stock market participant} = 1) = \Phi(\alpha + \beta_k \cdot \text{Proxy}_k + \text{controls} + \text{year FE}) $$ run separately for each of four proxy variables on the East German broker subsample (N = 171,343 investor-years): - $$\text{Pollution}_c$$ = 1 if investor lives in a municipality on the 1990 GDR environmental emergency list (negative experience proxy) - $$\text{NoWestTV}_c$$ = 1 if municipality did not receive West German TV signals (negative experience proxy) - $$\text{RenamedCity}_c$$ = 1 if municipality was renamed under the GDR communist regime (positive experience proxy) - $$\text{OlympicGold}_c$$ = indicator scaled by inverse population rank for whether an Olympic gold medal winner was born in the same municipality (positive experience proxy) Table VII, p. 1136. SE clustered by broker customer. ### GDR memories and participation (R7) Same specification as R6 but using survey self-reports for five GDR memory questions (Likert scale): living standard, wishing GDR back, disappointed in FRG, positive GDR experience, positive GDR memories. East German survey subsample only (N = 1,661-4,874). Table VIII, p. 1138. SE clustered by municipality. ### Portfolio return and characteristic regressions (R8, R9) $$ \alpha_{E\text{-}W,\, t} = \text{Long East portfolio} - \text{Short West portfolio} $$ Monthly portfolio returns (including dividends, from Thomson Reuters Datastream) are regressed on CAPM, Fama-French three-factor, and Carhart four-factor models using German risk factors (CFR Cologne). Both equal- and value-weighted portfolio constructions used. N = 92 monthly observations. Table IX Panel A, p. 1140. Portfolio characteristics (passive investment indicator, number of assets, fund fees, Herfindahl index, bank-owned product share) regressed on East dummy plus the same broker-data controls. N = 515,600-839,292. Table IX Panel B, p. 1141. ## Datasets used | Dataset | Role in paper | Wiki page | |---|---|---| | Bilendi online survey (2023) | Representative survey of 9,695 Germans (5,286 East, 4,409 West); attitudes, stock market participation, demographics, trust, risk tolerance | no page yet | | Proprietary bank data (2019) | 326,437 randomly selected bank customers; financial product holdings, wealth, income, stock market participation | no page yet | | Online broker data (2004-2012) | 839,292 investor-year observations for 230,229 retail investors; security holdings, portfolio characteristics, returns | no page yet | | Thomson Reuters Datastream | Monthly stock returns (including dividends) for portfolio return calculations; merged into broker data | no page yet | | SAVE survey (Germany) | Municipality-level real estate wealth panel, merged as control into broker data | no page yet | | German Census / Federal Statistical Office | Education variables (share with high-school degree) and economic indicators at municipality level | no page yet | | GDR 1990 Environmental Emergency Report | Municipality-level air-pollution indicator (18 GDR municipalities requiring immediate action) | no page yet | | Braggion, von Meyerinck & Schaub (2023) bank data (1920-1924) | Historical baseline: stock market participation for 2,000+ East and West German customers before the GDR, to rule out pre-existing differences | no page yet | Sample: survey 2023 (cross-section); bank 2019 (cross-section); broker June 2004-December 2012 (panel). Geographic scope: Germany (East former GDR vs. West FRG). The broker data cover 171,343 East German investor-year observations used in the within-East experience analysis. ## When to read the full paper Read the [original](https://doi.org/10.1111/jofi.70006) if you are: studying the long-run behavioral effects of political or ideological exposure on financial markets; replicating the geography-based experience proxies (pollution, West-TV access, renamed cities, Olympic victories); designing surveys to measure ideology and financial behavior jointly; or studying the financial welfare costs of ideological aversion to capital markets. The Internet Appendix contains all robustness tables (IA.III-IA.XV), variable definitions (Table IA.I), and the exact survey question wording (Table IA.X). ## Attribution and rights Source: peer-reviewed, *The Journal of Finance* 81(2), April 2026, pp. 1103-1145. DOI: [10.1111/jofi.70006](https://doi.org/10.1111/jofi.70006). Copyright 2025 the American Finance Association. This article is paywalled; no Creative Commons licence is in effect. This distillation was extracted by an LLM (claude-sonnet-4-6) on 2026-06-01 and is **not human-verified or independently reproduced**. Access to the full text requires a subscription to *The Journal of Finance* or institutional access via Wiley Online Library. > Laudenbach, Christine, Ulrike Malmendier, and Alexandra Niessen-Ruenzi. > "The Long-Lasting Effects of Experiencing Communism on Attitudes toward > Financial Markets." *The Journal of Finance* 81, no. 2 (April 2026): > 1103-1145. DOI: 10.1111/jofi.70006.