The surprising importance of Swedish twins

I really like Swedish twins because you can do almost anything with them. Established in 1960 in Stockholm the Swedish Twin Registry (STR) is the largest database of twins and multiplets in the world. It contains the data of virtually every twin born in Sweden since 1886. Today, researchers have access to the data of about 194,000 twins. The most important data about these twins is of course whether they are monozygotic (identical) twins or dizygotic (fraternal) twins. Monocygotic twins have the identical gene code, while dizygotic twins are no more similar than regular siblings. Yet, most of the time, twins grow up in the same household at the same time, i.e. they share the same environment. Thus, by comparing physiological traits or behaviours of monozygotic and dizygotic twins, medical researchers can estimate the impact genes have on a human. This way, it is possible to determine the heritability of diseases like cancer or schizophrenia, but also mental illnesses and propensity to take drugs etc. 

Thanks to Swedish twins and twins in other countries we now have a much better understanding of all kinds of diseases as well as how personality traits and personal skills form and the impact education has on a person. Because the STR is the largest of its kind in the world, it also has the largest number of a very sought-after kind of twin: Identical twins reared apart. Sometimes, twins are given to adoption and in some rare cases, identical twins are separated at birth and adopted by different parents. Nowadays, this practice is largely eliminated for the benefit of the child, but in the past this has happened from time to time. While difficult for the children, this is a true gold mine for researchers, because identical twins that were separated as babies and grew up in different environment have the identical gene code that is exposed to very different environments. With these twins reared apart, one can identify the impact a shared environment has on a person vs. the impact of the unique life experiences have. Thus, by examining these people, one can tease out the influence parents and the childhood home have on the development of a child. Again, the medical and psychological sciences have gained many valuable insights into diseases pathways and human development from these studies.

But what has all of that to do with finance? Funny you should ask… It turns out that Sweden also has some of the most transparent tax records in the world. With the exception of the King, the tax forms of every person are freely available to the public, including income, investments and other information. Thus, by pairing this tax information with the data from the STR, one can investigate the influence of genes on our financial risk taking and our investment behaviour. Thanks to this research we know that up to 45% of the variation between investors in biases such as a lack of diversification or excessive trading is driven by the genetic predisposition of the individual. What this means in practice is that investor education and efforts to improve financial literacy will likely fail to eliminate these biases in many investors. In other words, as advisers, we have to accommodate these biases rather than try to overcome or eliminate them. How to do that will be discussed in future posts.

However, one has to admit that scientists sometimes are using the STR for research that one may suspect of being driven more by the researcher’s personal interest than anything else. For example, I recently stumbled over an article in Nature that investigated if the propensity to own a dog is partly driven by our genes. As it turns out, about 50% of the variation between people in their attitude towards dogs is driven by their genome. So, if you are a dog lover or not is partly to blame on your parents. What I should do with that knowledge (except brag about it in a blog post) is unknown to me. Sometimes, we just need to have fun with that Swedish twin data.

Contribution of genes (A), shared environment (C) and individual experiences € on our decision to own a dog

Source: Fall et al. (2019).