Recent studies have claimed to detect interaction between candidate genes and specific environmental factors (Genotype x Environment interaction, G x E) in susceptibility to psychiatric disorder. The objective of the present study was to examine possible artifacts that could explain widely publicized findings. The additive effects of candidate genes and measured environment on liability to disorder were simulated under a model that allowed for mixture of distributions in liability conditional on genotype and environment. Simulated liabilities were dichotomized at a threshold value to reflect diagnosis of disorder. Multiple blocks of simulated data were analyzed by standard statistical methods to test for the main effects and interactions of genes and environment on outcome. The main outcome of this study was simulated liabilities and diagnoses of major depression and antisocial behavior. Analysis of the dichotomized data by logistic regression frequently detected significant G x E interaction even though none was present for liability. There is therefore reason to question the biological significance of published findings.