The Genetics of Investment Biases

48 Pages Posted: 23 Feb 2012 Last revised: 21 Aug 2013

Henrik Cronqvist

University of Miami - Department of Finance

Stephan Siegel

University of Washington - Michael G. Foster School of Business

Date Written: August 20, 2013

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.

Keywords: Household finance, behavioral finance, individual investor behavior

Suggested Citation

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

Henrik Cronqvist

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States
(305) 515-5898 (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/

Paper statistics

Downloads
1,929
Rank
5,717
Abstract Views
11,024