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Household Finances and the 'Big Five' Personality Traits

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  • Brown, Sarah

    () (University of Sheffield)

  • Taylor, Karl

    () (University of Sheffield)

Abstract

We explore the relationship between household finances and personality traits from an empirical perspective. Specifically, using individual level data drawn from the British Household Panel Survey, we analyse the influence of personality traits on financial decision-making at the individual level focusing on decisions regarding unsecured debt acquisition and financial assets. Personality traits are classified according to the 'Big Five' taxonomy: openness to experience, conscientiousness, extraversion, agreeableness and neuroticism. We find that certain personality traits such as extraversion and openness to experience exert relatively large influences on household finances in terms of the levels of debt and assets held. In contrast, personality traits such as conscientiousness and neuroticism appear to be unimportant in influencing levels of unsecured debt and financial asset holding. Our findings also suggest that personality traits have different effects across the various types of debt and assets held. For example, openness to experience does not appear to influence the probability of having national savings but is found to increase the probability of holding stocks and shares, a relatively risky financial asset.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6191.

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Length: 33 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:iza:izadps:dp6191

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Keywords: Big Five personality traits; financial assets; unsecured debt;

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  1. Martin Browning & Annamaria Lusardi, 1995. "Household Saving: Micro Theories and Micro Facts," Department of Economics Working Papers 1995-02, McMaster University.
  2. Gropp, Reint & Scholz, John Karl & White, Michelle J, 1997. "Personal Bankruptcy and Credit Supply and Demand," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 217-51, February.
  3. Cobb-Clark, Deborah A. & Schurer, Stefanie, 2012. "The stability of big-five personality traits," Economics Letters, Elsevier, vol. 115(1), pages 11-15.
  4. Borghans, Lex & Duckworth, Angela Lee & Heckman, James J. & Weel, Bas ter, 2008. "The economics and psychology of personality traits," Open Access publications from Maastricht University urn:nbn:nl:ui:27-22807, Maastricht University.
  5. Sarah Brown & Gaia Garino & Karl Taylor, 2005. "Mortgages and Financial Expectations: A Household Level Analysis," Discussion Papers in Economics 05/9, Department of Economics, University of Leicester, revised Dec 2006.
  6. Yannis Bilias & Roger Koenker, 2001. "Quantile regression for duration data: A reappraisal of the Pennsylvania Reemployment Bonus Experiments," Empirical Economics, Springer, vol. 26(1), pages 199-220.
  7. repec:ese:iserwp:2009-22 is not listed on IDEAS
  8. Hochguertel, Stefan & Alessie, Rob & van Soest, Arthur, 1997. " Saving Accounts versus Stocks and Bonds in Household Portfolio Allocation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 81-97, March.
  9. Guido Heineck & Silke Anger, 2008. "The Returns to Cognitive Abilities and Personality Traits in Germany," SOEPpapers on Multidisciplinary Panel Data Research 124, DIW Berlin, The German Socio-Economic Panel (SOEP).
  10. Alessandra Guariglia, 2001. "Saving behaviour and earnings uncertainty: Evidence from the British Household Panel Survey," Journal of Population Economics, Springer, vol. 14(4), pages 619-634.
  11. Marco Caliendo & Frank M. Fossen & Alexander S. Kritikos, 2011. "Personality Characteristics and the Decision to Become and Stay Self-Employed," SOEPpapers on Multidisciplinary Panel Data Research 369, DIW Berlin, The German Socio-Economic Panel (SOEP).
  12. Donald Cox & Tullio Japelli, 1993. "The Effect Of Borrowing Constraints On Consumer Liabilities," Boston College Working Papers in Economics 228, Boston College Department of Economics.
  13. Sarah Brown & Karl Taylor, 2008. "Household debt and financial assets: evidence from Germany, Great Britain and the USA," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(3), pages 615-643.
  14. Parker,Simon C., 2009. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521728355.
  15. Mathilde Almlund & Angela Lee Duckworth & James J. Heckman & Tim D. Kautz, 2011. "Personality Psychology and Economics," NBER Working Papers 16822, National Bureau of Economic Research, Inc.
  16. Sarah Brown & Gaia Garino & Karl Taylor & Stephen Wheatley Price, 2005. "Debt and Financial Expectations: An Individual- and Household-Level Analysis," Economic Inquiry, Western Economic Association International, vol. 43(1), pages 100-120, January.
  17. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
  18. Cobb-Clark, Deborah A. & Schurer, Stefanie, 2011. "Two Economists’ Musings on the Stability of Locus of Control," IZA Discussion Papers 5630, Institute for the Study of Labor (IZA).
  19. Jonathan Crook, 2001. "The demand for household debt in the USA: evidence from the 1995 Survey of Consumer Finance," Applied Financial Economics, Taylor and Francis Journals, vol. 11(1), pages 83-91.
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