On The Origins of Risk-Taking in Financial Markets
(2015) In Working Paper / Department of Economics, School of Economics and Management, Lund University- Abstract
- 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... (More)
- 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. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/7752485
- author
- E. Black, Sandra ; Devereux, Paul J. ; Lundborg, Petter LU and Majlesi, Kaveh LU
- organization
- publishing date
- 2015
- type
- Working paper/Preprint
- publication status
- published
- subject
- keywords
- Investment behavior, Nature-Nurture, Risk-taking, Portfolio choice
- in
- Working Paper / Department of Economics, School of Economics and Management, Lund University
- issue
- 20
- pages
- 44 pages
- publisher
- Department of Economics, Lund University
- language
- English
- LU publication?
- yes
- id
- 904b7606-a6f6-4cdc-ba54-4a50560c996b (old id 7752485)
- alternative location
- http://swopec.hhs.se/lunewp/abs/lunewp2015_020.htm
- date added to LUP
- 2016-04-04 10:32:58
- date last changed
- 2018-11-21 20:59:24
@misc{904b7606-a6f6-4cdc-ba54-4a50560c996b, abstract = {{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.}}, author = {{E. Black, Sandra and Devereux, Paul J. and Lundborg, Petter and Majlesi, Kaveh}}, keywords = {{Investment behavior; Nature-Nurture; Risk-taking; Portfolio choice}}, language = {{eng}}, note = {{Working Paper}}, number = {{20}}, publisher = {{Department of Economics, Lund University}}, series = {{Working Paper / Department of Economics, School of Economics and Management, Lund University}}, title = {{On The Origins of Risk-Taking in Financial Markets}}, url = {{https://lup.lub.lu.se/search/files/5565068/8054000.pdf}}, year = {{2015}}, }