Nature or nurture: What determines investor behavior?

Amir Barnea, Henrik Cronqvist, Stephan Siegel

Research output: Contribution to journalArticlepeer-review

109 Scopus citations


Using data on identical and fraternal twins' complete financial portfolios, we decompose the cross-sectional variation in investor behavior. We find that a genetic factor explains about one-third of the variance in stock market participation and asset allocation. Family environment has an effect on the behavior of young individuals, but this effect is not long-lasting and disappears as an individual gains experience. Frequent contact among twins results in similar investment behavior beyond a genetic factor. Twins who grew up in different environments still display similar investment behavior. Our interpretation of a genetic component of the decision to invest in the stock market is that there are innate differences in factors affecting effective stock market participation costs. We attribute the genetic component of asset allocation-the relative amount invested in equities and the portfolio volatility-to genetic variation in risk preferences.

Original languageEnglish (US)
Pages (from-to)583-604
Number of pages22
JournalJournal of Financial Economics
Issue number3
StatePublished - Dec 2010
Externally publishedYes


  • Behavioral Genetics
  • Investor Heterogeneity
  • Portfolio Choice

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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