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Genetic Variation in Financial Decision-Making


  • David Cesarini is at the Department of Economics and the Center for Experimental Social Science at New York University and also at the Research Institute of Industrial Economics (IFN); Magnus Johannesson and Björn Wallace are at the Department of Economics, Stockholm School of Economics; Paul Lichtenstein is at the Department of Medical Epidemiology and Biostatistics, Karolinska Institutet; and Örjan Sandewall is at NERA Economic Consulting and at IFN. We are grateful to two anonymous reviewers and the editors for detailed comments on an earlier draft of this manuscript. We also thank Malcolm Baker, Jonathan Beauchamp, Dan Benjamin, Terry Burnham, Magnus Dahlquist, Chris Dawes, Peter Diamond, Esther Duflo, Ernst Fehr, James Fowler, Glenn Harrison, Magnus Henrekson, Sandy Jencks, David Laibson, Matthew Notowidigdo, Steve Pischke, James Poterba, Drazen Prelec, Andrei Shleifer, and Per Strömberg for helpful discussions. IFN provided a hospitable environment in which a first draft of this paper was written. The usual caveat applies. An Internet Appendix containing sample code for the behavior genetic models is available at


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.