Individual Investors' Trading Activity and Major Lifecycle Events: The Case of Divorce

41 Pages Posted: 4 Jun 2014 Last revised: 15 Jun 2020

See all articles by Andrew R. Grant

Andrew R. Grant

University of Sydney - Discipline of Finance, Faculty of Economics and Business; Financial Research Network (FIRN)

Petko S. Kalev

La Trobe Business School

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

P. Joakim Westerholm

University of Sydney Business School; Financial Research Network (FIRN)

Date Written: January 24, 2020

Abstract

How are financial market participation and trading impacted by material events during individual investors' lifetimes? Using proprietary data, we identify transfers of common stock initiated by marriage breakdown and analyze the trading decisions and share trading performance of the divorced partners. In aggregate, while divorcing couples underperform their matched peers, active traders outperform less actively trading divorcees after settlement is reached. Our analysis thus suggests that the life-cycle distraction of divorce temporarily reduces the performance of active individual investors, which improves once the stressor is removed. Further, smaller portfolios of the full sample of divorcees suffer more underperformance which emanates from sales at unfavorable prices, thus pointing to liquidity-motivated fire sales of stocks post-divorce.

Keywords: Decision Making, Divorce, Individual Investors, Performance, Trading Behavior

JEL Classification: G11, G12, G30

Suggested Citation

Grant, Andrew R. and Kalev, Petko S. and Subrahmanyam, Avanidhar and Westerholm, P. Joakim, Individual Investors' Trading Activity and Major Lifecycle Events: The Case of Divorce (January 24, 2020). FIRN Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=2445073 or http://dx.doi.org/10.2139/ssrn.2445073

Andrew R. Grant

University of Sydney - Discipline of Finance, Faculty of Economics and Business ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
61-2-9036-7991 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Petko S. Kalev

La Trobe Business School ( email )

Department of Economics and Finance
Donald Whitehead Building: Level 3, DWB313
Bundoora, Victoria 3086
Australia
+613 9479 6285 (Phone)
+613 9479 1654 (Fax)

HOME PAGE: http://www.latrobe.edu.au/business/about/staff/profile?uname=PKalev

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)

Institute of Global Finance, UNSW Business School

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

P. Joakim Westerholm (Contact Author)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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