The genetics of investment biases

Henrik Cronqvist, Stephan Siegel

Research output: Contribution to journalArticle

36 Citations (Scopus)

Abstract

For a long list of investment "biases," including lack of diversification, excessive trading, and the disposition effect, we find that genetic differences explain up to 45% of the remaining variation across individual investors, after controlling for observable individual characteristics. The evidence is consistent with a view that investment biases are manifestations of innate and evolutionary ancient features of human behavior. We find that work experience with finance reduces genetic predispositions to investment biases. Finally, we find that even genetically identical investors, who grew up in the same family environment, often differ substantially in their investment behaviors due to individual-specific experiences or events.

Original languageEnglish (US)
Pages (from-to)215-234
Number of pages20
JournalJournal of Financial Economics
Volume113
Issue number2
DOIs
StatePublished - Jan 1 2014
Externally publishedYes

Fingerprint

Evolutionary
Finance
Diversification
Work experience
Disposition effect
Individual characteristics
Individual investors
Human behavior
Investment behavior
Investors

Keywords

  • Behavioral genetics
  • Investment biases
  • Portfolio choice

ASJC Scopus subject areas

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

Cite this

The genetics of investment biases. / Cronqvist, Henrik; Siegel, Stephan.

In: Journal of Financial Economics, Vol. 113, No. 2, 01.01.2014, p. 215-234.

Research output: Contribution to journalArticle

Cronqvist, Henrik ; Siegel, Stephan. / The genetics of investment biases. In: Journal of Financial Economics. 2014 ; Vol. 113, No. 2. pp. 215-234.
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