Blogs & Comment

Genetics and investing

A recent research paper suggests investment behavior has a lot to do with genes. Or, as the authors say, individuals to a large extent are biologically pre-disposed to certain investment behaviors .
Nature or Nurture: What Determines Investor Behavior? looks at the asset allocation and other investment choices of close to 40,000 identical and non-identical twins in the Swedish Twin Registry database. It found that up to 45% of the overall heterogeneity in investment behavior was explained by a latent genetic factor. Extraneous factors such as age, education, net-worth, and entrepreneurial activity, were controlled.
The authors believe that their finding is not only relevant for understanding the foundations of investor behavior, but alsofor the effectiveness of public policy intervention related to financial markets. In particular, attempts to improvethe financial literacy of the public face considerable challenges: to the extent investor behavior is hereditary such investment behavior can persist despite ample feedback and education.