Why Does Portfolio Choice Correlate Across Generations?
62 Pages Posted: 22 Oct 2016 Last revised: 1 Sep 2019
Date Written: August 29, 2019
Early-life transmission of preferences and characteristics has been identified as an explanation for why family members hold similar portfolios. New findings in this paper suggest social interaction with parents in an individual’s adulthood is also an important contributor. We show investors tend to hold the same securities as their parents. Instrumental variables that exploit social networks and a natural experiment based on mergers suggest the intergenerational security-choice correlation reflects social influence within families. Intergenerational correlations in portfolio choice would be an order of magnitude smaller in the absence of identical security holdings generated by social influence.
Keywords: social influence, intergenerational correlation, portfolio choice, wealth inequality
JEL Classification: D31, G11, J62
Suggested Citation: Suggested Citation