Till Death (Or Divorce) Do us Part: Early-Life Family Disruption and Fund Manager Behavior
67 Pages Posted: 9 Apr 2019 Last revised: 18 Jun 2019
Date Written: March 16, 2019
We show that fund managers who experienced early-life family disruption (death or divorce of a parent) are more risk-averse, i.e., they take lower idiosyncratic, systematic, and downside risk. This result is most pronounced for stronger treatments, e.g., when disruption occurred during managers’ formative years or in cases of parental deaths when the bereaved parent had no new partner. We also find that treated managers are more likely to sell their holdings in reaction to risk increasing (firm) events, hold fewer lottery-like stocks, make smaller tracking errors, and bet less on factors during recessions, but do not perform worse than their untreated cohorts. Our evidence indicates that familial background affects economic decisions later in life even for finance professionals.
Keywords: Family Disruption, Formative Experiences, Portfolio Activities, Risk-Taking
JEL Classification: G11, G23, G41
Suggested Citation: Suggested Citation