Till Death (or Divorce) Do Us Part: Early-life Family Disruption and Investment Behavior
71 Pages Posted: 9 Apr 2019 Last revised: 10 Nov 2019
Date Written: November 8, 2019
We show a long-lasting association between a common societal phenomenon, early-life family disruption, and investment behavior. Fund managers who experienced the death or divorce of their parents during childhood take lower risk and are more likely to sell their holdings following risk-increasing firm events. They make smaller tracking errors, hold fewer lottery stocks, and show a stronger disposition effect. The results strengthen as treatment intensifies, i.e., when disruption occurred during formative years, when bereaved families had less social support, and after (unexpected) parental deaths. The evidence adds to our understanding of the role of social factors and “nurture” in finance.
Keywords: Disposition effect, Family disruption, Formative experience, Investor behavior, Risk-taking, Social finance
JEL Classification: G11, G23, G41
Suggested Citation: Suggested Citation