Can Genetics Determine Your Financial Future?
Your DNA may reveal how much financial risk you're willing to take.
By Dr. Ranit Mishori, PARADE
The financial crisis has led to a lot of finger-pointing—at bankers, government regulators, and scam artists. But if you've lost money in the market, consider this: The fault may lie partly in your genes.
New brain-chemistry data suggest a link between an individual's investing style and his or her genetic makeup. By testing saliva for certain genetic markers, scientists can tell whether you're likely to get into riskier investments or to put your money into something safer. Risk-taking has been linked to variations in the genes that regulate the brain's serotonin and dopamine—chemicals that affect mood, anxiety, and addiction.
Researchers invited 65 men and women to a lab at Northwestern University, near Chicago. The volunteers were given money and told to invest it as they wished, choosing between risky assets and safe ones. Saliva samples were taken to determine each investor's anxiety and risk-taking profile.
The results were intriguing. People with a high-risk version of the dopamine gene put their money in risky investments about 25 percent more often than those with the gene's more common version. Volunteers with the high-anxiety version of the serotonin gene were more careful about money management. They invested 28 percent less money in risky investments than people with the non-anxious version.
Other researchers who've looked at the relationship between biology and financial decision-making see the male hormone testosterone as the culprit. In a study that appeared in Evolution and Human Behavior, 98 male Harvard students were asked to play an investment game. Those with testosterone levels 33 percent higher than average invested 10 percent more of their money.
Researchers at Cambridge University found that among London traders, higher levels of early-morning testosterone equaled better-than-average daily profits.
These findings are part of a growing field called neuroeconomics, which combines neuroscience, economics, and psychology to study how people make financial decisions.
Still, genes probably account for "less than 30 percent of variation in risk-taking behavior," says Camelia Kuhnen of the Kellogg School of Management at Northwestern University, one of the authors of the genetics and money study. Most investment decisions, she points out, are driven by education level, cultural factors, knowledge of an investment's past performance, and recent news events. Adds Joan Chiao of Northwestern's Department of Psychology, the other author of the study: "People cannot use this as an excuse for their bad financial decisions."
