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.
Journal of Finance
Genetic Variation in Financial Decision–Making