Till Death (or Divorce) Do Us Part: Early-Life Family Disruption and Investment Behavior

67 Pages Posted: 9 Apr 2019 Last revised: 15 May 2020

See all articles by André Betzer

André Betzer

University of Wuppertal - Schumpeter School of Business and Economics

Peter Limbach

University of Cologne and Centre for Financial Research (CFR)

P. Raghavendra Rau

University of Cambridge

Henrik Schürmann

BUW - Schumpeter School of Business and Economics

Date Written: January 28, 2020

Abstract

We document 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

Betzer, André and Limbach, Peter and Rau, P. Raghavendra and Schürmann, Henrik, Till Death (or Divorce) Do Us Part: Early-Life Family Disruption and Investment Behavior (January 28, 2020). Available at SSRN: https://ssrn.com/abstract=3353686 or http://dx.doi.org/10.2139/ssrn.3353686

André Betzer (Contact Author)

University of Wuppertal - Schumpeter School of Business and Economics ( email )

Gaußstraße 20
Wuppertal
Germany

HOME PAGE: http://finance.uni-wuppertal.de/index.php?id=1153

Peter Limbach

University of Cologne and Centre for Financial Research (CFR) ( email )

Albertus-Magnus-Platz
Köln, 50923
Germany

HOME PAGE: http://www.finance.uni-koeln.de

P. Raghavendra Rau

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

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

Henrik Schürmann

BUW - Schumpeter School of Business and Economics ( email )

Gaußstraße 20
Wuppertal, 42119
Germany

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