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

See all articles by Henrik Cronqvist

Henrik Cronqvist

University of Miami - Department of Finance

Alessandro Previtero

Indiana University - Kelley School of Business - Department of Finance; National Bureau of Economic Research (NBER)

Stephan Siegel

University of Washington - Michael G. Foster School of Business; CESifo

Roderick E. White

University of Western Ontario - Richard Ivey School of Business

Date Written: October 27, 2015

Abstract

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

Cronqvist, Henrik and Previtero, Alessandro and Siegel, Stephan and White, Roderick E., The Fetal Origins Hypothesis in Finance: Prenatal Environment, the Gender Gap, and Investor Behavior (October 27, 2015). Available at SSRN: https://ssrn.com/abstract=2431602 or http://dx.doi.org/10.2139/ssrn.2431602

Henrik Cronqvist

University of Miami - Department of Finance ( email )

5250 University Drive
314-E Jenkins Building
Coral Gables, FL 33146
United States
(305) 284-9482 (Phone)

HOME PAGE: http://sites.google.com/site/henrikcronqvist/

Alessandro Previtero (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
+1 (512) 581-5420 (Phone)

HOME PAGE: http://aleprevitero.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stephan Siegel

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/

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Roderick E. White

University of Western Ontario - Richard Ivey School of Business ( email )

1151 Richmond Street North
London, Ontario N6A 3K7
Canada

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