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Trapped by our past

Our investment decisions are determined not just by current realities but also by our formative years.
Trapped by our past

Our investment decisions are shaped not just by current realities but by our own personal histories, according to new research.

The University of Cambridge’s Raghavendra Rau and colleagues studied over 2,000 US fund managers and found that those who as children had seen their parents divorce or one of them die took less risk with their portfolios and were more likely to sell winning stocks than fund managers who had grown up in two-parent families.

This is perhaps because the loss of a parent when you are young makes you more anxious even later in life, which makes you less willing to take risk and quicker to crystallise profits on a stock by selling. This holds true even controlling for the fund managers’ age, place of birth and parental occupation.

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