Retail Trading Activity and Major Lifecycle Events: The Case of Divorce

70 Pages Posted: 4 Jun 2014 Last revised: 21 Dec 2021

See all articles by Andrew R. Grant

Andrew R. Grant

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

Petko S. Kalev

RoZetta Institute; La Trobe Business School

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Financial Research Network (FIRN)

P. Joakim Westerholm

University of Sydney Business School

Date Written: November 13, 2021

Abstract

How are trading activity and performance impacted by material events during individual
investors’ lifetimes? Using a unique dataset, we identify transfers of common stock
initiated by the major event of divorce and analyze trading patterns and performance
of divorced traders. In aggregate, divorcing individuals underperform, and part of this
underperformance is due to liquidation needs post-divorce. Cross-sectionally, however,
actively-trading divorced investors earn superior performance in the window surrounding
divorce settlement, while underperforming just prior to divorce. This result survives
a difference-in-differences analysis based on a propensity-score matched sample of nondivorced
investors. Our analysis thus suggests that the life-cycle distraction of divorce
temporarily reduces the performance of active retail traders, which improves once the
stressor is removed.

Keywords: Individual Investors, Divorce Performance, Trading Behavior

JEL Classification: G11, G41

Suggested Citation

Grant, Andrew R. and Kalev, Petko S. and Subrahmanyam, Avanidhar and Westerholm, P. Joakim, Retail Trading Activity and Major Lifecycle Events: The Case of Divorce (November 13, 2021). FIRN Research Paper Forthcoming, Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2445073 or http://dx.doi.org/10.2139/ssrn.2445073

Andrew R. Grant

University of Sydney Business School - Discipline of Finance ( email )

H69 Codrington Business School Building
Sydney, NSW 2006
Australia
61-2-9036-6238 (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

RoZetta Institute ( email )

Sydney

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)

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

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