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Genetic Variation in Financial Decision-Making

Author

Listed:
  • DAVID CESARINI
  • MAGNUS JOHANNESSON
  • PAUL LICHTENSTEIN
  • ÖRJAN SANDEWALL
  • BJÖRN WALLACE

Abstract

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. Copyright (c) 2010 the American Finance Association.

Suggested Citation

  • David Cesarini & Magnus Johannesson & Paul Lichtenstein & Örjan Sandewall & Björn Wallace, 2010. "Genetic Variation in Financial Decision-Making," Journal of Finance, American Finance Association, vol. 65(5), pages 1725-1754, October.
  • Handle: RePEc:bla:jfinan:v:65:y:2010:i:5:p:1725-1754
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