The Behavioral Genetics of Behavioral Anomalies

A number of recent papers have studied the environmental and genetic sources of individual di¤erences in economic and …nancial decision-making. Here we contribute to this burgeoning literature by extending it to a number of key behavioral biases that are thought to be of importance for consumption, saving and portfolio selection decisions. Using survey-based evidence from more than 11,000 Swedish twins we demonstrate that well documented departures from expected utility maximization such as self-control problems, illusion of control, loss aversion, the conjunction fallacy, and non-fungibility of money are moderately heritable. In contrast, common environment seems to have little in‡uence on an individual’s susceptability to behavioral biases. We report some suggestive evidence of a shared genetic architecture between cognitive ability and susceptibility to the various anomalies. Taken together with previous …ndings these results underline the importance of genetic di¤erences as a source of heterogeneity in economic and …nancial decision-making.