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

71 Pages Posted: 8 Mar 2021

See all articles by André Betzer

André Betzer

University of Wuppertal - Schumpeter School of Business and Economics

Peter Limbach

University of Bielefeld; Centre for Financial Research (CFR)

P. Raghavendra Rau

University of Cambridge

Henrik Schürmann

BUW - Schumpeter School of Business and Economics

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Date Written: January 12, 2021

Abstract

We document a long-lasting association between a common societal phenomenon, early-life family disruption, and investment behavior. Controlling for socioeconomic status and family background, we find fund managers who experienced the death or divorce of their parents during childhood exhibit a stronger disposition effect, take lower risk, and are more likely to sell their holdings following risk-increasing firm events. The results are consistent with persistent symptoms of post-traumatic stress and strengthen as treatment intensifies. The evidence adds to our understanding of the role of social factors and “nurture” in finance as well as the origin of investment biases.

Keywords: Disposition Effect, Family Disruption, Feelings, 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 12, 2021). Journal of Banking and Finance, Forthcoming , Available at SSRN: https://ssrn.com/abstract=3764536 or http://dx.doi.org/10.2139/ssrn.3764536

André Betzer

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 Bielefeld ( email )

Centre for Financial Research (CFR) ( email )

Albertus-Magnus-Platz
Köln, 50923
Germany

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

P. Raghavendra Rau (Contact Author)

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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