Abstract
Although prior research has shown that risk-taking preferences and choices are correlated across many domains, there is a dearth of research investigating whether these correlations are primarily the result of genetic or environmental factors. We examine the extent to which common genetic factors account for the association between general risk-taking preferences and domain-specific risk-taking preferences, and between general risk-taking preferences and risk taking choices in financial investments, stock market participation and business formation. Using data from 1898 monozygotic (MZ) and 1344 same-sex dizygotic (DZ) twins, we find that general risk-taking shares a common genetic component with domain-specific risk-taking preferences and risk-taking choices.
Highlights
The description of people as risk-taking or risk-avoiding types is not a rhetorical flourish
We find that a substantive part of the variation in: general risk-taking preference; domain-specific risk taking preferences in the five domains of finance, health, career, driving, and sports and leisure; stock market participation; financial investment choices; and the decision to be self-employed are explained by genetic factors
Prior research has shown that general risk preferences, domain-specific risk preferences and choices that involve risk are correlated, very little work has investigated whether these correlations were primarily the result of genetic or environmental factors
Summary
The description of people as risk-taking or risk-avoiding types is not a rhetorical flourish. Our paper extends the study of Beauchamp et al (2017) by investigating the drivers of these associations through examining the genetic covariations between general risk-taking preferences and financial investment choices, domain-specific risk preferences, stock market participation. Different variants of genes predispose people to develop different risk preferences across a variety of settings These genetically-influenced preferences lead the same people to be disproportionately likely to make risky financial investment choices, participate in the stock market and choose entrepreneurship as an occupation (and make other similar decisions we cannot observe), as they seek to fit their behavioral choices to their innate tendencies. The final section discusses the results and provides our conclusions
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