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Faculty of Economics

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Cesarini, D., Johannesson, M., Lichtenstein, P., Sandewall, Ö. and Wallace, B.

Genetic variation in financial decision-making

Journal of Finance

Vol. 65(5) pp. 1725-1754 (2010)

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

JEL Codes: G02

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