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Genetic Variation in Financial Decision‐Making
Author(s) -
CESARINI DAVID,
JOHANNESSON MAGNUS,
LICHTENSTEIN PAUL,
SANDEWALL ÖRJAN,
WALLACE BJÖRN
Publication year - 2010
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2010.01592.x
Subject(s) - variation (astronomy) , portfolio , construct (python library) , variance (accounting) , pension , actuarial science , investment (military) , economics , investment decisions , econometrics , business , finance , behavioral economics , computer science , accounting , political science , physics , politics , law , programming language , astrophysics
Individuals differ in how they construct their investment portfolios, yet empirical models of portfolio risk typically account only for a small portion of the cross‐sectional variance. This paper asks whether genetic variation can explain some of these individual differences. Following a major pension reform Swedish adults had to form a portfolio from a large menu of funds. We match data on these investment decisions with the Swedish Twin Registry and find that approximately 25% of individual variation in portfolio risk is due to genetic variation. We also find that these results extend to several other aspects of financial decision‐making.