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Nature Or Nurture: What Determines Investor Behavior?

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Executive Summary

Using data on identical and fraternal twins' complete financial portfolios, author decomposed the cross sectional variation in investor behavior. It's found 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 experiences. 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.

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