Abstract

http://ssrn.com/abstract=1467088
 
 

References (104)



 
 

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Nature or Nurture: What Determines Investor Behavior?


Amir Barnea


HEC Montreal

Henrik Cronqvist


China Europe International Business School (CEIBS)

Stephan Siegel


University of Washington - Michael G. Foster School of Business

February 3, 2010

Fourth Singapore International Conference on Finance 2010 Paper

Abstract:     
Using data on identical and fraternal twins' complete financial portfolios, we decompose the cross-sectional variation in investor behavior. We find that a genetic factor explains about one third of the variance in stock market participation and asset allocation. Family environment has an effect on the behavior of young individuals, but this effect is not long-lasting and disappears as an individual gains experiences. Frequent contact among twins results in similar investment behavior beyond a genetic factor. Twins who grew up in different environments still display similar investment behavior. Our interpretation of a genetic component of the decision to invest in the stock market is that there are innate differences in factors affecting effective stock market participation costs. We attribute the genetic component of asset allocation - the relative amount invested in equities and the portfolio volatility - to genetic variation in risk preferences.

Number of Pages in PDF File: 56

Keywords: Portfolio Choice, Investor Heterogeneity, Behavioral Genetics

JEL Classification: D10, D31, G11

working papers series


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Date posted: September 2, 2009 ; Last revised: March 4, 2010

Suggested Citation

Barnea, Amir and Cronqvist, Henrik and Siegel, Stephan, Nature or Nurture: What Determines Investor Behavior? (February 3, 2010). Fourth Singapore International Conference on Finance 2010 Paper. Available at SSRN: http://ssrn.com/abstract=1467088 or http://dx.doi.org/10.2139/ssrn.1467088

Contact Information

Amir Barnea
HEC Montreal ( email )
3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-7321 (Phone)
514-340-5632 (Fax)
Henrik Cronqvist
China Europe International Business School (CEIBS) ( email )
699 Hongfeng Road, Pudong
Shanghai, 201206
China
+86 21-2890-5653 (Phone)
HOME PAGE: http://sites.google.com/site/henrikcronqvist/
Stephan Siegel (Contact Author)
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
HOME PAGE: http://faculty.washington.edu/ss1110/
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