Ever wonder how much control you have over your investing tendencies? Finance professors Henrik Cronqvist of Claremont McKenna College and Stephan Siegel of the University of Washington have studied the role genetics play in how we invest. For their research (which you can download here), Cronqvist and Siegel used data from the Swedish Twin Registry (the world's largest twins database) and matched it up with taxpayer data from Sweden, which, until 2007, required disclosure of investment holdings. By comparing investing habits of identical twins, who share 100% of their genes, with those of fraternal twins, who share 50% of their genes on average, Cronqvist and Siegel arrived at some interesting findings. They discussed their research with Morningstar.com.
One of the conclusions you arrive at is that education cannot overcome genetic predisposition to invest a certain way. Does this mean we all are destined to invest in whatever way is hard-wired into us?
We cannot say why education doesn't reduce genetic investment biases. At this stage, our goal was simply to examine if education is a moderator that reduces the effect of genetic predispositions with which we're born. Apparently it doesn't. The investment behavior of someone with a doctorate in, say, physics seems to be influenced as much by his/her genes as your barber. Some of our results about financial occupation/experience indeed suggest that it's practical experience that matters. Note, by the way, that our findings differ from what researchers have found with respect to education and health outcomes, where it has been documented that higher education reduces the degree to which genetic-based health problems develop in an individual.