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On the Origins of Risk‐Taking in Financial Markets
Author(s) -
BLACK SANDRA E.,
DEVEREUX PAUL J.,
LUNDBORG PETTER,
MAJLESI KAVEH
Publication year - 2017
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/jofi.12521
Subject(s) - explanatory power , nature versus nurture , volatility (finance) , portfolio , economics , financial market , investment (military) , financial risk , finance , financial economics , philosophy , genetics , epistemology , politics , political science , law , biology
Financial investment behavior is highly correlated between parents and their children. Using Swedish data, we find that the decision of adoptees to hold equities is associated with the behavior of both biological and adoptive parents, implying a role for both genetic and environmental influences. However, we find that nurture has a stronger influence on the share of financial assets invested in equities and on portfolio volatility, suggesting that financial risk‐taking is substantially environmentally determined. The parental investment variables substantially increase the explanatory power of cross‐sectional regressions and so may play an important role in understanding cross‐sectional heterogeneity in investment behavior.