The effect of anger and anxiety traits on investment decisions
AbstractThis study investigates the extent to which people make financial decisions on the basis of their dispositional tendency to engage in a specific emotion, such as anger or anxiety. We predicted that trait anger is associated with the decision to invest, whereas trait anxiety motivates individuals to avoid investments. We employed a six question survey, considering real life investment decisions, stock trend predictability and preference toward risk investments, and three hypothetic scenarios to measure the participants’ risk attitudes in the area of finance. The results showed that trait anger predicted risky decisions: it was positively associated with the willingness to invest money in different kinds of stocks, preferring medium/long-term investments, and with high predictability assessment in the forecast of stock trends. Contrarily, trait anxiety predicted conservative financial decisions: it was associated with the decision not to invest savings, to hold interest-bearing accounts, and with low predictability of stock trends. In hypothetic scenarios trait anger predicted a medium risk portfolio and the decision to wait before selling both loss and gain investments, while trait anxiety was associated with the preference for a low risk portfolio and with the decision to immediately sell a stock both if it increases or decreases in value. These data are consistent with cognitive models of emotions, highlighting their functional utility and extend the knowledge of the relationship between personality traits and real life investment decision-making.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Psychology.
Volume (Year): 33 (2012)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/joep
Anger; Anxiety; Personality traits; Economic decision-making; Personal finance;
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