Investing Like My Parents: Do Parents Affect Children’s Risk Taking Behavior?
59 Pages Posted: 26 Oct 2021 Last revised: 7 Dec 2021
Date Written: October 25, 2021
We find that learning from parents explains heterogeneity in financial decisions later in life. Using parents’ stock market experiences before parenthood as instrumental variables for parents’ risk-taking, we show that parents’ risk-taking positively affects children’s stock market decisions. More importantly, exploiting a finding that parents spend more quality time with their first child, we find that this parental effect is mainly driven by learning from parents through one’s childhood interactions with parents. We also examine the wealth outcomes implied. Our results contribute to the understanding of how family traits passed down over generations could lead to wealth inequality across families.
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