Using data on identical and fraternal twins’ complete financial portfolios, we decompose the crosssectional variation in investor behavior. We find that a genetic factor explains about one third of the variance in stock market participation and asset allocation. Family environment has an effect on the behavior of young individuals, but this effect is not long-lasting and disappears as an individual gains experiences. Frequent contact among twins results in similar investment behavior beyond a genetic factor. Twins who grew up in different environments still display similar investment behavior. Our interpretation of a genetic component of the decision to invest in the stock market is that there are innate differences in factors affecting effective stock market participation costs. We attribute the genetic component of asset allocation – the relative amount invested in equities and the portfolio volatility – to genetic variation in risk preferences.
Source: “Nature or Nurture: What Determines Investor Behavior?” from Institute for Financial Research, #72, 9/10
5 things you didn’t know about Wall Street
Does money buy happiness or does money buy status which brings happiness?
Does earning a lot of money make it harder for a woman to find a husband?
I want to subscribe!