Whether you’re a safe, conservative investor or a fast-trading stock-swapper, genes may actually play a role in some of your decisions, according to new research from business professors Stephan Siegel and Henrik Cronqvist .

Individuals frequently exhibit investment biases, such as not diversifying enough, being reluctant to sell stocks that have lost money or simply trading too much. Research from Siegel and Cronqvist shows some investors may be born with those biases.

The pair analyzed data on fraternal and identical twins, and found that identical twins (those with the same genes) are more likely to exhibit the same investment biases than fraternal twins. Swedish financial institutions kept detailed information on citizens’ investments in stocks, bonds and mutual funds for tax purposes for many years, and the records from 1999 to 2007 were used for this study on more than 30,000 twins.

Siegel is a professor at the University of Washington, Michael G. Foster School of Business; and Cronqvist is a professor at Claremont McKenna College, Robert Day School of Economics and Finance.

“We find that a long list of investment biases,

[for example], the reluctance to realize losses, performance chasing, and the home bias, are ‘human,’ in the sense that we are born with them,” wrote the researchers. “Genetic factors explain up to 50 percent of the variation in these biases across individuals.”

In particular, the researchers studied the following biases:

  1. Under-diversification – the tendency not to spread risk broadly across investments;
  2. Home bias – the preference to invest in domestic, rather than foreign, securities;
  3. Loss aversion – the reluctance to sell securities that have lost value;
  4. Performance chasing – the tendency to buy securities that have performed well in the past with no guarantee of similar performance in the future;
  5. Turnover – investors’ trading intensity;
  6. Skewness preference – investors’ appetite for lottery-type securities.

The study also looks at whether a person’s experiences and environment affect genetic predisposition. One finding, for example, suggests that those with work experience in finance are less affected by genetic biases. The researchers also found no evidence that education is a significant moderator of genetic investment behavior.

Their research is available online through the Social Science Research Network.