On The Origins of Risk-Taking in Financial Markets
Author
Summary, in English
Risk-taking in financial markets is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use data on stock market participation of Swedish adoptees and relate this to the investment behavior of both their biological and adoptive parents. We find that stock market participation of parents increases that of children by about 34% and that both pre-birth and post-birth factors are important. However, once we condition on having positive financial wealth, we find that nurture has a much stronger influence on risk-taking by children, and the evidence of a relationship between stock-holding of biological parents and their adoptive children becomes weaker. We find similar results when we study the share of financial wealth that is invested in stocks. This suggests that a substantial proportion of the transmission of risk behavior from parents to children is environmentally determined.
Publishing year
2015
Language
English
Publication/Series
Working Paper / Department of Economics, School of Economics and Management, Lund University
Issue
20
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Document type
Working paper
Publisher
Department of Economics, Lund University
Topic
- Economics
Keywords
- Investment behavior
- Nature-Nurture
- Risk-taking
- Portfolio choice
Status
Published