Generational risk taking

A recent paper from Berkeley investigates how the risk you take as an investor may be affected by the economic environment you grew up in. Everyone has heard the stories of those who lived through the depression who refuse to trust banks. This paper finds that people who lived through strong stock market returns have an increased percentage of their wealth invested in stocks. Similarly, those who lived through times of high inflation are less likely to invest in bonds. Early experiences of macroeconomic shocks can color someone's investing philosophy for years to come, although they do show that people are still subject to recency bias, although it fades away over time. This approach supports behavioral finance, which runs counter to the traditional theory that all individuals are rational and evaluate past information (historical average returns) equally.

Going forward, will young investors over the last decade return to investing in stocks after the above average volatility experienced starting in 2000? Or will we have to wait for the next generation for the great bull market?