Twin Picks: Disentangling the Determinants of Risk-Taking in Household Portfolios

Laurent E. Calvet, Paolo Sodini

NBER Working Paper No. 15859
Issued in April 2010
NBER Program(s):Asset Pricing, Economic Fluctuations and Growth

This paper investigates the determinants of financial risk-taking in a panel containing the asset holdings of Swedish twins. We measure the impact of a broad set of demographic, financial, and portfolio characteristics, and use yearly twin pair fixed effects to control for genes and shared background. We report a strong positive relation between risky asset market participation and financial wealth. Among participants, the average financial wealth elasticity of the risky share is significantly positive and estimated at 22%, which suggests that the average individual investor has decreasing relative risk aversion. Furthermore, the financial wealth elasticity of the risky share itself is heterogeneous across investors and varies strongly with characteristics. The elasticity decreases with financial wealth and human capital, and increases with habit, real estate wealth and household size. As a consequence, the elasticity of the aggregate demand for risky assets to exogenous wealth shocks is close to, but does not coincide with, the elasticity of a representative investor with constant relative risk aversion. We confirm the robustness of our results by running time-differenced instrumental variable regressions, and by controlling for zygosity, lifestyle, mental and physical health, the intensity of communication between twins, and measures of social interactions.

download in pdf format
   (453 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15859

Twin Picks: Disentangling the Determinants of Risk-Taking in Household Portfolios” (with P. Sodini), forthcoming in Journal of Finance. citation courtesy of

Users who downloaded this paper also downloaded* these:
Calvet, Campbell, and Sodini w14699 Measuring the Financial Sophistication of Households
Calvet, Campbell, and Sodini w14177 Fight or Flight? Portfolio Rebalancing by Individual Investors
Calvet, Campbell, and Sodini w12030 Down or Out: Assessing the Welfare Costs of Household Investment Mistakes
Wachter and Yogo w16316 Why Do Household Portfolio Shares Rise in Wealth?
Paravisini, Rappoport, and Ravina w16063 Risk Aversion and Wealth: Evidence from Person-to-Person Lending Portfolios
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us