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

Abstract

We show 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 riskincreasing 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.