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Is Financial Risk-Taking Behavior Genetically Transmitted?

Author

Listed:
  • Cesarini, David

    (Research Institute of Industrial Economics (IFN))

  • Johannesson, Magnus

    (Stockholm School of Economics)

  • Lichtenstein, Paul

    (Karolinska Institutet)

  • Sandewall, Örjan

    (Research Institute of Industrial Economics (IFN))

  • Wallace, Björn

    (Stockholm School of Economics)

Abstract

In this paper, we use a sample of almost 30,000 Swedish mono- and dizygotic twins to study the heritability of financial risk-taking. Following a major pension reform in the year 2000, virtually all Swedish adults had to simultaneously make a financial decision affecting post-retirement wealth. We take this event as a field experiment to infer risk preferences. We use standard techniques from behavior genetics to partition variation in risk-taking into environmental and genetic components. Our findings suggest that genetic variation is an important source of individual heterogeneity in financial risk-taking.

Suggested Citation

  • Cesarini, David & Johannesson, Magnus & Lichtenstein, Paul & Sandewall, Örjan & Wallace, Björn, 2008. "Is Financial Risk-Taking Behavior Genetically Transmitted?," Working Paper Series 765, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0765
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    Citations

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    Cited by:

    1. Rieger, Matthias, 2015. "Risk aversion, time preference and health production: Theory and empirical evidence from Cambodia," Economics & Human Biology, Elsevier, vol. 17(C), pages 1-15.
    2. Olaf Hübler, 2013. "Are Tall People Less Risk Averse Than Others?," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 133(1), pages 23-42.
    3. Heena Thanki & Narayan Baser, 2019. "Interactive Impact of Demographic Variables and Personality Type on Risk Tolerance," Emerging Economy Studies, International Management Institute, vol. 5(1), pages 42-54, May.
    4. Nathan Nunn & Leonard Wantchekon, 2011. "The Slave Trade and the Origins of Mistrust in Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3221-3252, December.
    5. Da Silva, Sergio & Baldo, Dinora & Matsushita, Raul, 2011. "Biological correlates of the Allais paradox - updated," MPRA Paper 32747, University Library of Munich, Germany.
    6. Hermansson, Cecilia & Jonsson, Sara, 2021. "The impact of financial literacy and financial interest on risk tolerance," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).

    More about this item

    Keywords

    Genetics; Risk-Taking; Portfolio Investment; Twins;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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