On the Origins of Risk-Taking

44 Pages Posted: 13 Jul 2015

See all articles by Sandra E. Black

Sandra E. Black

University of Texas at Austin - Center for Law, Business, and Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics; Norwegian School of Economics (NHH) - Department of Economics

Paul J. Devereux

University College Dublin - Department of Economics; IZA Institute of Labor Economics

Petter Lundborg

Lund University School of Economics and Management; Tinbergen Institute; IZA Institute of Labor Economics

Kaveh Majlesi

Lund University; Research Institute of Industrial Economics (IFN); IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: July 2015

Abstract

Risk-taking behavior is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use data on stock market participation of Swedish adoptees and relate this to the investment behavior of both their biological and adoptive parents. We find that stock market participation of parents increases that of children by about 34% and that both pre-birth and post-birth factors are important. However, once we condition on having positive financial wealth, we find that nurture has a much stronger influence on risk-taking by children, and the evidence of a relationship between stock-holding of biological parents and their adoptive children becomes very weak. We find similar results when we study the share of financial wealth that is invested in stocks. This suggests that a substantial proportion of risk-attitudes and behavior is environmentally determined.

Suggested Citation

Black, Sandra E. and Devereux, Paul J. and Lundborg, Petter and Majlesi, Kaveh, On the Origins of Risk-Taking (July 2015). NBER Working Paper No. w21332, Available at SSRN: https://ssrn.com/abstract=2629938

Sandra E. Black (Contact Author)

University of Texas at Austin - Center for Law, Business, and Economics ( email )

Austin, TX
United States

National Bureau of Economic Research (NBER) ( email )

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IZA Institute of Labor Economics

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Norwegian School of Economics (NHH) - Department of Economics

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Norway

Paul J. Devereux

University College Dublin - Department of Economics ( email )

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Ireland

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

Petter Lundborg

Lund University School of Economics and Management ( email )

P.O Box 7080
Lund
Sweden

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

Kaveh Majlesi

Lund University ( email )

Box 117
Lund, SC Skane S221 00
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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