Genetics and Traits
How do genetics and heritability affect a person's tendency to make risky stock market decisions?
01
Overall personality heritability
Portions of personality itself are heritable, and not just a product of the environment one finds themselves in. A 2012 paper by Christian Kandler concluded that 15-20% of overall human personality is determined by specific genes. This carries over into an individual's risk aversion, and contributes to their tendency to make risky decisions in the stock market overall.
02
Genetics and Stock Market Behavior
Genetics also appear to play a direct role in stock market behavior. A study by Cesarini et. al. found that about a third of the variation in market participation and asset allocation can be explained by a genetic factor. While there are environmental influences, this study, which included twins raised separately, demonstrates the importance of genetics in predicting someone's risk aversion index.
03
Traits affecting Market Behavior
Certain traits also play a small role in affecting how a certain person behaves in the stock market. A 2021 study by Harry Turtle found that taller and more naturally thin people were willing to take risks in the market. While the differences were small, it is interesting to note the role of physical traits in someone's propensity to take risks in the stock market.
Genetics and certain physical traits play a relatively small role in determining someone's tendency to make risky decisions. Genetic factors account for around 30% of otherwise unexplained differences in market behavior, and physical traits like height may play a small role in determining market behavior.