Social Interaction in the Family: Evidence from Investors’ Security Holdings

Abstract

We show investors tend to hold the same securities as their parents. This intergenerational correlation is stronger for mothers and family members who are more likely to communicate with each other. An instrumental variables estimation and a natural experiment suggest the correlation reflects social influence. This influence runs not only from parents to children, but also vice versa. The resulting holdings of identical securities increase intergenerational correlations in portfolio choice, exacerbate wealth inequality, and amplify the consequences of behavioral biases.

Keywords: social influence, intergenerational correlation, portfolio choice, wealth inequality

JEL Classification: D31, G11, J62