Financial Markets and Genetic Variation

59 Pages Posted: 15 Jan 2017 Last revised: 1 Feb 2018

See all articles by Eric Cardella

Eric Cardella

Texas Tech University - Rawls College of Business

Ivalina Kalcheva

University of California, Riverside

Danjue Shang

Utah State University - Department of Economics and Finance; University of Arizona

Date Written: September 06, 2017


We investigate the extent to which a country’s degree of genetic variation contributes to the observed variation in financial market activity across countries. We postulate that genetic variation can affect financial markets through its impact on aggregate investment behavior, innovation in the financial sector, and productivity. Our country-level, cross-sectional analysis reveals a significant hump-shaped relation between a country’s predicted genetic variation and the size of its financial markets. This result is consistent with the conjecture that at relatively intermediate degrees of genetic variation, the associated intermediate levels of trust and risk-taking within the country result in the largest investment flows into public financial markets. Our results are robust to different measures of financial market size, several regression specifications, and the inclusion of a broad range of controls such as legal origin, institutional characteristics, culture, natural endowment, and trade openness. Our main findings appear to be restricted specifically to equity markets (vs. debt markets) where there is relatively more uncertainty and, thus, trust and risk-taking are relatively more important. Additional analysis suggests that better overall country-level governance can moderate the role that genetic variation plays in shaping equity market size.

Keywords: financial markets, genetic variation, migratory movements, governance

JEL Classification: G1, G2, G3, O1, O4, O5

Suggested Citation

Cardella, Eric and Kalcheva, Ivalina and Shang, Danjue, Financial Markets and Genetic Variation (September 06, 2017). Available at SSRN: or

Eric Cardella

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

Ivalina Kalcheva (Contact Author)

University of California, Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States

Danjue Shang

Utah State University - Department of Economics and Finance ( email )

Logan, UT 84322-1400
United States

University of Arizona ( email )

Department of Finance
Eller College of Management
Tucson, AZ 85721
United States

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