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The Genetics of Investment Biases

Henrik Cronqvist

China Europe International Business School (CEIBS)

Stephan Siegel

University of Washington - Michael G. Foster School of Business

August 20, 2013

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.

Number of Pages in PDF File: 48

Keywords: Household finance, behavioral finance, individual investor behavior

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Date posted: February 23, 2012 ; Last revised: August 21, 2013

Suggested Citation

Cronqvist, Henrik and Siegel, Stephan, The Genetics of Investment Biases (August 20, 2013). Available at SSRN: http://ssrn.com/abstract=2009094 or http://dx.doi.org/10.2139/ssrn.2009094

Contact Information

Henrik Cronqvist
China Europe International Business School (CEIBS) ( email )
699 Hongfeng Road, Pudong
Shanghai, 201206
+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/
Feedback to SSRN

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