Page last updated at 08:11 GMT, Wednesday, 11 February 2009

Genes fuel financial risk-taking

stock exchange
Decisions may be influenced by 'physical' factors

Some people who take big risks on the stock market can blame their genes for their behaviour, work suggests.

The US scientists say their findings might give an insight into one reason for the current economic slump.

The Northwestern University team found two genes that regulate the hormones dopamine and serotonin could predict whether a person would gamble.

The same genes have already been linked to addiction and negative emotions, PLoS ONE journal says.

In the study, 65 volunteers were asked to make investment decisions - some high risk and some low risk - as part of an experiment.

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 behaviour
Researcher Dr Camelia Kuhnen

The investigators collected saliva from each participant to look at the DNA.

They discovered that the volunteers who took the most risks had a particular version of a dopamine-regulating gene and another gene that regulates serotonin.

Specifically, people with the short serotonin transporter 5-HTTLPR were far more cautious than those with the long version.

Similarly, people with the 7-repeat allele of the dopamine DRD4 gene took more risks than those with other versions of the same gene.

Although the researchers say less than 30% of variation across people in risk-taking comes from genetics, the rest comes from experience and upbringing, they believe their findings do shed some light on the current financial crisis.

When market bubbles happen and people make stupid decisions it is not just down to one or two people and their genes
Researcher and ex-trader Dr John Coates

Researcher Dr Camelia Kuhnen said: "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 behaviour.

"Keep in mind risk-taking in the marketplace may be the result of the genetic makeup of traders and investors, their past experiences in the stock market or their cultural background."

Dr John Coates, an ex-trader who is now researching the link between hormones and financial risk-taking at the University of Cambridge, said: "Our body has an overwhelming effect on our decisions. Genes and hormones can influence us. But they are not the only or the major influencing factors. They do not override our common sense.

"When market bubbles happen and people make stupid decisions it is not just down to one or two people and their genes.

"We are taught how to control our urges. Economic training and risk management is imperative. What is going on in the markets right now is the banks have forgotten these lessons and have let bankers go feral."

His own work suggests the hormone testosterone may also partly influence financial decisions and risk-taking.

"If that is true, the answer may be to have more women and older men controlling the market," he said.



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