Paper - investment biases are typically human

Discussion in Psychology and Money Management

Updated February 22, 2012

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Paper - investment biases are typically human

Nicolas11 · 2012-02-22T17:36:04-05:00

A research paper... Why Do Individuals Exhibit Investment Biases? Henrik Cronqvist and Stephan Siegel February 22, 2012 Abstract: We find that a long list of investment biases, e.g., the reluctance to realize losses, performance chasing, and the home bias, are "human," in the sense that we are born with them. Genetic factors explain up to 50% of the variation in these biases across individuals. We find no evidence that education is a significant moderator of genetic investment behavior. Genetic effects on investment behavior are correlated with genetic effects on behaviors in other domains (e.g., those with a genetic preference for familiar stocks also exhibit a preference for familiarity in other domains), suggesting that investment biases is only one facet of much broader genetic behaviors. Our evidence provides a biological basis for non-standard preferences that have been used in asset pricing models, and has implications for the design of public policy in the domain of investments. Number of Pages in PDF File: 45 Why Do Individuals Exhibit Investment Biases? by Henrik Cronqvist, Stephan Siegel :: SSRN Nicolas

February 22nd, 2012, 05:36 PM	#1 (permalink)
Nicolas11 near Paris, France Elite Member Experience: Beginner Platform: - Trading: - Posts: 1,071 since Aug 2011 Thanks Given: 2,232 Thanks Received: 1,774	A research paper... Why Do Individuals Exhibit Investment Biases? Henrik Cronqvist and Stephan Siegel February 22, 2012 Abstract: We find that a long list of investment biases, e.g., the reluctance to realize losses, performance chasing, and the home bias, are "human," in the sense that we are born with them. Genetic factors explain up to 50% of the variation in these biases across individuals. We find no evidence that education is a significant moderator of genetic investment behavior. Genetic effects on investment behavior are correlated with genetic effects on behaviors in other domains (e.g., those with a genetic preference for familiar stocks also exhibit a preference for familiarity in other domains), suggesting that investment biases is only one facet of much broader genetic behaviors. Our evidence provides a biological basis for non-standard preferences that have been used in asset pricing models, and has implications for the design of public policy in the domain of investments. Number of Pages in PDF File: 45 Why Do Individuals Exhibit Investment Biases? by Henrik Cronqvist, Stephan Siegel :: SSRN Nicolas Attached Thumbnails