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Why Does Portfolio Choice Correlate across Generations?

54 Pages Posted: 22 Oct 2016 Last revised: 29 Nov 2017

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 - Government Institute for Economic Research (VATT)

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Date Written: November 28, 2017

Abstract

We find that investors tend to hold the same securities as their parents. Instrumental variables that exploit social networks and a natural experiment based on mergers allow us to attribute the security-choice correlation to social influence within families. This influence runs not only from parents to children, but also in the opposite direction. Security holdings correlate more when family members are more likely to communicate and when they are more susceptible to social influence. The identical security holdings that social influence generates largely explain why risk-return profiles of household portfolios correlate across generations.

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? (November 28, 2017). Available at SSRN: https://ssrn.com/abstract=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 - Government Institute for Economic Research (VATT) ( email )

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

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