Molecular Genetics, Risk Aversion, Return Perceptions, and Stock Market Participation

TitleMolecular Genetics, Risk Aversion, Return Perceptions, and Stock Market Participation
Publication TypeReport
Year of Publication2020
AuthorsSias, R, Starks, L, Turtle, HJ
Series TitleNBER Working Paper
Document Number27638
InstitutionNational Bureau of Economic Research
CityCambridge, MA
KeywordsGenetics, return perceptions, Risk Aversion, stock market participation
Abstract

We show that molecular variation in DNA related to cognition, personality, health, and body shape, predicts an individual’s equity market participation and risk aversion. Moreover, the molecular genetic endowments predict individuals’ return perceptions, most of which we find to be strikingly biased. The genetic endowments also strongly associate with many of the investor characteristics (e.g., trust, sociability, wealth) shown to explain heterogeneity in equity market participation. Our analysis helps elucidate why financial choices are heritable and how genetic endowments can help explain the links between financial choices, risk aversion, beliefs, and other variables known to explain stock market participation.

DOI10.3386/w27638
Citation Key11392