The Fetal Origins Hypothesis in Finance: Prenatal Environment, the Gender Gap, and Investor Behavior
62 Pages Posted: 1 May 2014 Last revised: 28 Oct 2015
Date Written: October 27, 2015
We find that differences in individuals' prenatal environment explain heterogeneity in financial decisions later in life. An exogenous increase in exposure to prenatal testosterone is associated with the masculinization of financial behavior, specifically with elevated risk taking and trading in adulthood. We also examine birth weight. Those with higher birth weight are more likely to participate in the stock market, whereas those with lower birth weight tend to prefer portfolios with higher volatility and skewness, consistent with compensatory behavior. Our results contribute to the understanding of how the prenatal environment shapes an individual's behavior in financial markets later in life.
Keywords: risk preferences, fetal origins hypothesis, testosterone
JEL Classification: G02
Suggested Citation: Suggested Citation