Till Death (or Divorce) Do Us Part: Early-Life Family Disruption and Investment Behavior
71 Pages Posted: 8 Mar 2021
Date Written: January 12, 2021
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: Suggested Citation