Research from Aalto University School of Business reveals that investors are likelier to own stocks or mutual funds held by their parents.
Samuli Knüpfer conducted the study, professor of Ownership at Aalto University School of Business, together with professors Elias Rantapuska and Matti Sarvimäki.
They analysed register-based data sourced from government authorities, including Finnish Tax Administration records and the Mutual Fund Report, which, when combined, covered the entire investor population in Finland from 2004–2008.
They found that the likelihood of investors purchasing assets already held by their father or mother is 12.2% and 15.8%, respectively. For other assets, the probability is only 0.3%.
The extent to which parents affect their children’s investment decisions varies depending on geographical distance, family size, and gender differences, which impact how consistently family members communicate.
Mothers appear to have a greater influence on their children’s investment decisions, suggesting they are the more effective source of investment-related information in families.
If a parent has security holdings in the industry they work in, it is a strong predictor that their child will invest in that industry, irrespective of their occupation.
The researchers also found that children influence their parents’ investment decisions, but to a much lesser extent than in the opposite direction.
“Shared security holdings also exacerbate wealth inequality by increasing the dispersion in the families’ returns on wealth. This larger return dispersion is important for understanding the drivers of wealth inequality,” says Professor Knüpfer.