Many of you are probably conducting a year-end review of your finances. You're thinking about the outlook for 2010, possible risks to your assets, and your personal circumstances. There is, though, something else that bears upon your financial decisions - how tall you are.
New research by Alok Kumar of the University of Texas at Austin and George Korniotis of the Federal Reserve has found that height matters enormously for our asset allocation decisions - more so than age or education. "Taller individuals are more likely to participate in riskier equity markets as opposed to the bond market," they say. In a study of people over 50 in 10 continental European countries, they estimate that among the tallest one-fifth of men 22.1 per cent own shares, compared with just 7 per cent of the shortest fifth. And the tallest fifth of men have twice as much of their wealth invested in stock markets as do short men.
In part, these differences occur because taller men, on average, earn more than shorter ones and are smarter and healthier. But, even controlling for such things, height still matters. An extra inch of loftiness is associated with a 1.8 percentage point rise in the share of equities in a man's wealth. As the average equity weighting is only 6.1 per cent, this is a huge effect.
There's a reason for this - taller people are more willing to take risks than shorter ones. Short men are more likely to get bullied at school and more likely to get laughed at when they ask girls out. So they learn in their youth that bad things are likely to happen. That deters them from buying shares when they are older even if they can afford to do so. By contrast, taller men tend to have happier early experiences - although not always, as your 6'1" correspondent can attest - and so become more willing to take risks; tall men are also more likely to own their own business.
There is, though, an exception to this. The very tallest men earn fewer shares than ordinarily tall ones. But this corroborates the theory. A lifetime spent ducking to avoid the tops of door-frames teaches a man to see risks everywhere, and this colours his attitude to the stock market.
The message here is the same as that from research by Stefan Nagel and Ulrike Malmendier, two other US economists. They found that people who saw the stock market do badly in their youth are less likely to own shares decades later. Our financial decisions are shaped by our lifetime experiences, even though these are irrelevant from a purely rationalistic perspective.
