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On the Origins of Risk-Taking in Financial Markets

E. Black, Sandra; Devereux, Paul J.; Lundborg, Petter LU and Majlesi, Kaveh LU (2017) In Journal of Finance 72(5). p.2229-2278
Abstract
Financial investment behavior is highly correlated between parents and their children. Using Swedish data, we find that the decision of adoptees to hold equities is associated with the behavior of both biological and adoptive parents, implying a role for both genetic and environmental influences. However, we find that nurture has a stronger influence on the share of financial assets invested in equities and on portfolio volatility, suggesting that financial risk-taking is substantially environmentally determined. The parental investment variables substantially increase the explanatory power of cross-sectional regressions and so may play an important role in understanding cross-sectional heterogeneity in investment behavior.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Journal of Finance
volume
72
issue
5
pages
2229 - 2278
external identifiers
  • scopus:85030685366
DOI
10.1111/jofi.12521
language
English
LU publication?
yes
id
b6595f5b-79c5-448a-bc8c-22d897bb870f
date added to LUP
2016-09-20 10:21:40
date last changed
2017-10-16 12:18:23
@article{b6595f5b-79c5-448a-bc8c-22d897bb870f,
  abstract     = {Financial investment behavior is highly correlated between parents and their children. Using Swedish data, we find that the decision of adoptees to hold equities is associated with the behavior of both biological and adoptive parents, implying a role for both genetic and environmental influences. However, we find that nurture has a stronger influence on the share of financial assets invested in equities and on portfolio volatility, suggesting that financial risk-taking is substantially environmentally determined. The parental investment variables substantially increase the explanatory power of cross-sectional regressions and so may play an important role in understanding cross-sectional heterogeneity in investment behavior.},
  author       = {E. Black, Sandra and Devereux, Paul J. and Lundborg, Petter and Majlesi, Kaveh},
  language     = {eng},
  number       = {5},
  pages        = {2229--2278},
  series       = {Journal of Finance},
  title        = {On the Origins of Risk-Taking in Financial Markets},
  url          = {http://dx.doi.org/10.1111/jofi.12521},
  volume       = {72},
  year         = {2017},
}