Genetic Variation In Financial Decision Making

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Executive Summary

Individuals differ in how they compose their investment portfolios, yet empirical models of portfolio risk typically only account for a small portion of the cross-sectional variance. This paper asks if genetic variation can explain some of these individual differences. Following a major pension reform Swedish adult had to compose a port-folio from a large menu of funds. They 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. They also show that these results extend to several other aspects of financial decision-making.

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