Why Does Portfolio Choice Correlate Across Generations?

60 Pages Posted: 22 Oct 2016 Last revised: 6 Jun 2019

See all articles by Samuli Knüpfer

Samuli Knüpfer

BI Norwegian Business School; Research Institute of Industrial Economics (IFN)

Elias Henrikki Rantapuska

Aalto University

Matti Sarvimäki

Aalto University - Department of Economics; Government of the Republic of Finland - VATT Institute for Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: June 5, 2019

Abstract

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

Knüpfer, Samuli and Rantapuska, Elias Henrikki and Sarvimäki, Matti, Why Does Portfolio Choice Correlate Across Generations? (June 5, 2019). Available at SSRN: https://ssrn.com/abstract=2857053 or http://dx.doi.org/10.2139/ssrn.2857053

Samuli Knüpfer (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

HOME PAGE: http://www.samuliknupfer.com

Research Institute of Industrial Economics (IFN)

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Elias Henrikki Rantapuska

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

Matti Sarvimäki

Aalto University - Department of Economics ( email )

PO Box 1210
FI-00101 Helsinki
Finland

HOME PAGE: http://www.aalto-econ.fi/sarvimaki

Government of the Republic of Finland - VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

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