The genetics of investment biases

Henrik Cronqvist (First Author), Stephan Siegel (Participant Author)

    Research output: Contribution to journalJournal

    42 Citations (Web of Science)

    Abstract

    For a long list of investment “biases,” including lack of diversification, excessive trading, and the disposition effect, we find that genetic differences explain up to 45% of the remaining variation across individual investors, after controlling for observable individual characteristics. The evidence is consistent with a view that investment biases are manifestations of innate and evolutionary ancient features of human behavior. We find that work experience with finance reduces genetic predispositions to investment biases. Finally, we find that even genetically identical investors, who grew up in the same family environment, often differ substantially in their investment behaviors due to individual-specific experiences or events.
    Original languageEnglish
    Pages (from-to)215-234
    JournalJournal of Financial Economics
    Volume113
    Issue number2
    DOIs
    Publication statusPublished - 2014

    Corresponding author email

    hcronqvist@ceibs.edu

    Keywords

    • BEHAVIORAL BIASES
    • Behavioral genetics
    • CHOICE
    • DECISION-MAKING
    • INDIVIDUAL INVESTORS
    • Investment biases
    • NATURAL-SELECTION
    • OVERCONFIDENCE
    • PROSPECT-THEORY
    • Portfolio choice
    • RISK
    • SENSATION SEEKING
    • STOCK-MARKET PARTICIPATION

    Indexed by

    • ABDC-A*
    • Scopus
    • SSCI

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