How Are Investor Trading Activity and Performance Affected by Major Lifecycle Events? The Case of Divorce
47 Pages Posted: 4 Jun 2014 Last revised: 3 Feb 2017
Date Written: February 1, 2017
How are financial market participation and trading impacted by material events during individuals’ lifetimes? We shed light on this question by analyzing the trading performance and decisions of individual investors who experience divorce. We utilize transaction-level stock price data from Finland that allow us to identify divorced individuals using court-ordered transfers of shares over a 17-year period. Divorcees earn returns that are approximately 16% p.a. lower than those of a control sample of closely matched peers. The lower returns of divorced individuals are most pronounced among investors holding small portfolios and investors who do not buy and sell actively around the divorce settlement. We argue that the results are driven by a combination of distraction and unexpected liquidity needs.
Keywords: divorce, stressors, individual investor performance
JEL Classification: G11, G12, G30
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