Birth order and portfolio choice

Yosef Bonaparte, Frank J. Fabozzi and David Koslowsky

Applied Economics, 2020, vol. 52, issue 7, 694-709

Abstract: This paper examines the impact of birth order on financial decision-making. In lieu of explanations such as dissimilar parental style across children with different birth orders (due to learning and experience) or the existence of sibling externalities commonly offered in the literature to explain the impact of birth order on financial decision-making, our key conjecture is that birth order influences a host of personality traits, including risk-taking behaviour, and thus financial decisions. Indeed, we find that only born males tolerate greater financial risks and exhibit higher propensity to participate in the stock market. Irrespective of their birth order, only born individuals are 4.7–13.7% more likely to participate in the stock market. Furthermore, we also find that only born males demonstrate more activity in the financial market (higher tendencies to trade assets). Collectively, our stylized results suggest that birth order can be used as a predictor of portfolio choice decisions.

Date: 2020
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DOI: 10.1080/00036846.2019.1646886

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