Individual Investors' Trading Activity and Major Lifecycle Events: The Case of Divorce

The effect of stressors on financial market investment decisions is underexplored. We investigate the association of a common stressful life event, divorce, with the trading behavior of individual investors. In the critical three year period around their divorce, investors realize lower returns compared to a control sample, as well as compared to their own portfolios in other years. After controlling for a number of demographic variables, we document that men and women both underperform immediately around divorce. Two years after, the trading performance of women recovers to pre-divorce levels, while that of men continues to be significantly lower.