Big-Time Financial Risk Taking: Blame It On The Genes?

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This is related to kool article in The Atlantic…also “two genes that regulate dopamine and serotonin neurotransmission and have been previously linked to emotional behavior, anxiety and addiction (5-HTTLPR and DRD4) are significant determinants of risk taking in investment decisions”

Big-Time Financial Risk Taking: Blame It On The Genes?
ScienceDaily (Feb. 11, 2009) — Financial institutions continue to teeter on the brink of ruin. Banks are still devouring bailout money without loosening credit enough to make a difference in a recession that is sweeping the globe. And everyone keeps asking, “How in the world did so many financial titans take such huge risks with our nation’s well being?”

A new Northwestern University study provides provocative insights that relate to, if not answer, that extraordinarily complex question.

The study, for the first time, links specific variants of two genes that regulate dopamine and serotonin neurotransmission to risk-taking in financial investment decisions.

People with the short serotonin transporter gene, 5-HTTLPR (two copies of the short allele), relative to those with the long version of that polymorphism (at least one copy of the long allele), invested 28 percent less in a risky investment. Similarly, people who carry the 7-repeat allele of the DRD4 gene in the dopamine family, relative to those carrying other versions of that gene, invested about 25 percent more in a risky investment.

“Our research pinpoints, for the first time, the roles that specific variants of the serotonin transporter gene and the dopamine receptor gene, play in predicting whether people are more or less likely to take financial risks, It shows that individual variability in our genetic makeup effects economic behavior.”

Prior research linking the two genetic variants of 5-HTTLPR and DRD4 to, respectively, negative emotion and addiction behaviors suggested to the Northwestern researchers that those particular brain mechanisms could play a role in financial risk-taking. But until the Northwestern study, the identification of specific genes underlying financial-risk preferences remained elusive.

“Emerging research told us, for example, that people higher in neuroticism are thought to carry the short allele of the 5-HTTLPR, a less efficient version of the serotonin transporter gene,” said Chiao. “Similarly, individuals with the 7-repeat allele of DRD4, relative to those with a other variants of that neurotransmitter, are more likely to have higher novelty seeking behavior.”

The Northwestern study suggests that researchers are getting closer to pinpointing specific genetic mechanisms underlying complex social and economic behavior that has been a mystery — including drug addiction, gambling and risk-taking.

“As we sort through the devastating consequences of this financial crisis, it might be useful to note how our genetic heritage is influencing our economic behavior,” said Chiao. “Think about how the excessive risks taken by just a few affected so many, from large institutions to average people.”

But, Kuhnen cautions, more research is needed to further understand investor behavior, given the complex influences of nature versus nurture on financial decisions. Less than 30 percent of variation across people in risk-taking comes from genetics. The rest comes from experience and upbringing.

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Big-Time Financial Risk Taking: Blame It On The Genes?

Standard

Big-Time Financial Risk Taking: Blame It On The Genes?
ScienceDaily (Feb. 11, 2009) — Financial institutions continue to teeter on the brink of ruin. Banks are still devouring bailout money without loosening credit enough to make a difference in a recession that is sweeping the globe. And everyone keeps asking, “How in the world did so many financial titans take such huge risks with our nation’s well being?”

A new Northwestern University study provides provocative insights that relate to, if not answer, that extraordinarily complex question.

The study, for the first time, links specific variants of two genes that regulate dopamine and serotonin neurotransmission to risk-taking in financial investment decisions.

People with the short serotonin transporter gene, 5-HTTLPR (two copies of the short allele), relative to those with the long version of that polymorphism (at least one copy of the long allele), invested 28 percent less in a risky investment. Similarly, people who carry the 7-repeat allele of the DRD4 gene in the dopamine family, relative to those carrying other versions of that gene, invested about 25 percent more in a risky investment.

“Our research pinpoints, for the first time, the roles that specific variants of the serotonin transporter gene and the dopamine receptor gene, play in predicting whether people are more or less likely to take financial risks, It shows that individual variability in our genetic makeup effects economic behavior.”

Prior research linking the two genetic variants of 5-HTTLPR and DRD4 to, respectively, negative emotion and addiction behaviors suggested to the Northwestern researchers that those particular brain mechanisms could play a role in financial risk-taking. But until the Northwestern study, the identification of specific genes underlying financial-risk preferences remained elusive.

“Emerging research told us, for example, that people higher in neuroticism are thought to carry the short allele of the 5-HTTLPR, a less efficient version of the serotonin transporter gene,” said Chiao. “Similarly, individuals with the 7-repeat allele of DRD4, relative to those with a other variants of that neurotransmitter, are more likely to have higher novelty seeking behavior.”

The Northwestern study suggests that researchers are getting closer to pinpointing specific genetic mechanisms underlying complex social and economic behavior that has been a mystery — including drug addiction, gambling and risk-taking.

“As we sort through the devastating consequences of this financial crisis, it might be useful to note how our genetic heritage is influencing our economic behavior,” said Chiao. “Think about how the excessive risks taken by just a few affected so many, from large institutions to average people.”

But, Kuhnen cautions, more research is needed to further understand investor behavior, given the complex influences of nature versus nurture on financial decisions. Less than 30 percent of variation across people in risk-taking comes from genetics. The rest comes from experience and upbringing.