According to a press release, by studying twins and their
financial behavior, researchers found that genetics account for one-third, on
average, and as much as 45% of investor behavior. Other factors previously
studied, such as age, gender, education, wealth and home ownership, when
combined explain only 5% to 10% of investor behavior, the research suggests.
“We found that genetics explains differences in
investor behavior much more than everything else that people have
proposed,” said Stephan Siegel, assistant professor of finance at the
University of Washington’s Foster School of Business, in the announcement.
The researchers cross-referenced nearly 38,000 twins in the Swedish Twin Registry with comprehensive personal financial data — stocks, bonds, real estate, cash — collected by the Swedish government. To separate genetics from environmental drivers of financial behavior, the researchers compared each twin pair’s stock market participation, asset allocation, and portfolio risk.
In all three measures, the data showed a significantly
higher correlation between identical twins than non-identical twins.
Correlation of a random sample of the population is close to zero. The
researchers said this stark difference between the identical and non-identical
twins relative to the general population is strong evidence that investing
behavior is, in significant part, hereditary.
In addition, the researchers considered 716 twins from
the Swedish registry who were raised apart and found their average correlation
in investing behavior to be virtually identical to those raised together,
adding more evidence that genetics drives investor behavior.