Why Does Portfolio Choice Correlate Across Generations?
60 Pages Posted: 22 Oct 2016 Last revised: 6 Jun 2019
Date Written: June 5, 2019
We find that investors tend to hold the same securities as their parents. These identical security holdings largely explain why risk-return profiles of household portfolios correlate across generations. Instrumental variables that exploit social networks and a natural experiment based on mergers suggest the security-choice correlation reflects social influence within families. This influence runs not only from parents to children, but also in the opposite direction. The social influence in adulthood substantially contributes to intergenerational correlations in portfolio choice.
Keywords: Social influence, intergenerational correlation, portfolio choice, wealth inequality
JEL Classification: D31, G11, J62
Suggested Citation: Suggested Citation