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Does personality predict financial risk tolerance of pre-retiree baby boomers?

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  • Rabbani, Abed G.
  • Yao, Zheying
  • Wang, Christina

Abstract

Financial risk tolerance is an important concept that helps financial planners recommend financial products to their clients. As the baby boomer generation approaches retirement, research to determine how these individuals perceive financial risk tolerance has grown exponentially. The present study examines the relationship between financial risk tolerance and the Big Five personality traits (also known as the Five-Factor Model), which include extraversion, agreeableness, conscientiousness, emotional stability, and openness to experience, in the baby boomer generation. We argue that the influences of Big-five personality traits are consistent in baby-boomer generation. We find that baby boomers with a higher degree of extraversion, emotional stability, and openness to experience are more risk tolerant, while those with a higher degree of agreeableness and conscientiousness have lower risk tolerance.

Suggested Citation

  • Rabbani, Abed G. & Yao, Zheying & Wang, Christina, 2019. "Does personality predict financial risk tolerance of pre-retiree baby boomers?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 23(C), pages 124-132.
    • Handle: RePEc:eee:beexfi:v:23:y:2019:i:c:p:124-132
    DOI: 10.1016/j.jbef.2019.06.001
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    Cited by:

    1. Natália Vraňaková & Zdenka Gyurák Babeľová & Andrea Chlpeková, 2021. "Sustainable Human Resource Management and Generational Diversity: The Importance of the Age Management Pillars," Sustainability, MDPI, vol. 13(15), pages 1-18, July.
    2. John Grable & Eun Jin Kwak & Martha Fulk & Aditi Routh, 2022. "A Simplified Measure of Investor Risk Aversion," Journal of Interdisciplinary Economics, , vol. 34(1), pages 7-34, January.
    3. Rao, Aniruddha S. & Lakkol, Savitha G., 2022. "A review on personality models and investment decisions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 35(C).
    4. Kamini Rai & Abha Gupta & Anshu Tyagi, 2021. "Personality Traits Leads to Investor’s Financial Risk Tolerance: A Structural Equation Modelling Approach," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 46(4), pages 422-437, November.

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    More about this item

    Keywords

    Big Five; Financial risk tolerance; Five-Factor Model; National Longitudinal Survey of Youth 1979; Pre-retiree baby boomers;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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