Genetic variation in financial decision-making

David Cesarini, Magnus Johannesson, Paul Lichtenstein, ÖRjan Sandewall, Bj ÖRn Wallace

    Research output: Contribution to journalArticle

    Abstract

    Individuals differ in how they construct their investment portfolios, yet empirical models of portfolio risk typically account only for a small portion of the cross-sectional variance. This paper asks whether genetic variation can explain some of these individual differences. Following a major pension reform Swedish adults had to form a portfolio from a large menu of funds. We match data on these investment decisions with the Swedish Twin Registry and find that approximately 25% of individual variation in portfolio risk is due to genetic variation. We also find that these results extend to several other aspects of financial decision-making.

    Original languageEnglish (US)
    Pages (from-to)1725-1754
    Number of pages30
    JournalJournal of Finance
    Volume65
    Issue number5
    DOIs
    StatePublished - Oct 2010

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    Financial decision making
    Portfolio risk
    Investment portfolio
    Registry
    Pension reform
    Investment decision
    Individual differences
    Empirical model
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    ASJC Scopus subject areas

    • Accounting
    • Finance
    • Economics and Econometrics

    Cite this

    Cesarini, D., Johannesson, M., Lichtenstein, P., Sandewall, ÖR., & Wallace, B. ÖR. (2010). Genetic variation in financial decision-making. Journal of Finance, 65(5), 1725-1754. https://doi.org/10.1111/j.1540-6261.2010.01592.x

    Genetic variation in financial decision-making. / Cesarini, David; Johannesson, Magnus; Lichtenstein, Paul; Sandewall, ÖRjan; Wallace, Bj ÖRn.

    In: Journal of Finance, Vol. 65, No. 5, 10.2010, p. 1725-1754.

    Research output: Contribution to journalArticle

    Cesarini, D, Johannesson, M, Lichtenstein, P, Sandewall, ÖR & Wallace, BÖR 2010, 'Genetic variation in financial decision-making', Journal of Finance, vol. 65, no. 5, pp. 1725-1754. https://doi.org/10.1111/j.1540-6261.2010.01592.x
    Cesarini D, Johannesson M, Lichtenstein P, Sandewall ÖR, Wallace BÖR. Genetic variation in financial decision-making. Journal of Finance. 2010 Oct;65(5):1725-1754. https://doi.org/10.1111/j.1540-6261.2010.01592.x
    Cesarini, David ; Johannesson, Magnus ; Lichtenstein, Paul ; Sandewall, ÖRjan ; Wallace, Bj ÖRn. / Genetic variation in financial decision-making. In: Journal of Finance. 2010 ; Vol. 65, No. 5. pp. 1725-1754.
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