Early-life family disruption (death or divorce of a parent) causes fund managers to be more risk averse when they manage their own funds

Betzer, André and Limbach, Peter and Rau, P. Raghavendra and Schürmann, Henrik, Till Death (Or Divorce) Do us Part: Early-Life Family Disruption and Fund Manager Behavior (March 16, 2019). SSRN http://dx.doi.org/10.2139/ssrn.3353686

Abstract: We show that early-life family disruption (death or divorce of a parent) causes fund managers to be more risk averse when they manage their own funds. Treated managers take lower idiosyncratic, systematic, and downside risk than untreated managers. This effect is most pronounced for managers who experienced family disruption during their formative years and in cases of parental deaths when the bereaved parent either had no new partner or had little social support. Treated managers also invest less in 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

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