On the Origins of Risk-Taking

Abstract

Risk-taking behavior is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use data on stock market participation of Swedish adoptees and relate this to the investment behavior of both their biological and adoptive parents. We find that stock market participation of parents increases that of children by about 34% and that both pre-birth and post-birth factors are important. However, once we condition on having positive financial wealth, we find that nurture has a much stronger influence on risk-taking by children, and the evidence of a relationship between stock-holding of biological parents and their adoptive children becomes very weak. We find similar results when we study the share of financial wealth that is invested in stocks. This suggests that a substantial proportion of risk-attitudes and behavior is environmentally determined.

Born with a Silver Spoon? Danish Evidence on Wealth Inequality in Childhood

“…Most of the wealth components are third-party reported. 6 Information about the value of financial assets and liabilities at the end of the year is reported to the tax authorities by banks, other financial institutions, and some government institutions, while the cash value of real estate is assessed by the tax authorities, based on detailed information of the real estate, and used for taxation of the imputed rent. 7 Third-party reported values of assets include all deposits, stocks, bonds, value of real estate, and deposited mortgages.…”

Gender role asymmetry and stock market participation – evidence from four European household surveys

“…Similarly, Lindquist and Säve-Söderbergh (2011) show in a natural experiment that females are more risk-averse when assigned to a male-dominated group, than if they are in a mixed or female-only group. Black et al (2015) provide evidence that risk-taking is, to a large extent, environmentally determined.…”

Early‐Life Circumstances Predict Measures of Trust among Adults: Evidence from Hunger Episodes in Post‐War Germany

“…This study is also related to an emerging body of economics literature that argues that societal and institutional environments and individual experiences over the life course can change preferences and expectations (Fehr and Hoff, ; Malmendier and Nagel, ; Black et al ., ). More specifically, with respect to social preferences and trust, Putnam et al .…”

“…Adult outcomes that are affected by shocks such as the experience of war or exposure to prolonged periods of hunger early in life include education and labor market status (Goodman et al, 2011;Juerges, 2013;Akbulut-Yuksel, 2014;Kesternich et al, 2014), preferences for food consumption (Kesternich et al, 2015), the development of egalitarian motivations (Bauer et al, 2014), and subjective well-being (Bertoni, 2015). 1 This study is also related to an emerging body of economics literature that argues that societal and institutional environments and individual experiences over the life course can change preferences and expectations (Fehr and Hoff, 2011;Nagel, 2011, 2016;Black et al, 2017). More specifically, with respect to social preferences and trust, Putnam et al (1994) and Bigoni et al (2015) argue that historical events have shaped preferences for cooperation in Southern and Northern Italy differentially, and that the resulting preference heterogeneity can account for the fact that individuals in the South and North react differently to similar institutions and incentives.…”