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Household finances and the 'Big Five' personality traits

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  • Sarah Brown

    ()
    (Department of Economics, The University of Sheffield)

  • Karl Taylor

    ()
    (Department of Economics, The 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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File URL: http://www.shef.ac.uk/economics/research/serps/articles/2011_025.html
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Bibliographic Info

Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2011025.

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Length: 32 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:shf:wpaper:2011025

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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. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521845731.
  3. Carol Bertaut & Martha Starr-McCluer, 2000. "Household portfolios in the United States," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2000-26, Board of Governors of the Federal Reserve System (U.S.).
  4. Guiso, Luigi & Jappelli, Tullio, 2000. "Household Portfolios in Italy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2549, C.E.P.R. Discussion Papers.
  5. Hochguertel, Stefan & Alessie, Rob & van Soest, Arthur, 1997. " Saving Accounts versus Stocks and Bonds in Household Portfolio Allocation," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 99(1), pages 81-97, March.
  6. Marco Caliendo & Frank Fossen & Alexander Kritikos, 2014. "Personality characteristics and the decisions to become and stay self-employed," Small Business Economics, Springer, Springer, vol. 42(4), pages 787-814, April.
  7. Donald Cox & Tullio Japelli, 1993. "The Effect Of Borrowing Constraints On Consumer Liabilities," Boston College Working Papers in Economics, Boston College Department of Economics 228, Boston College Department of Economics.
  8. 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.
  9. repec:ese:iserwp:2009-22 is not listed on IDEAS
  10. 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).
  11. 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, Western Economic Association International, vol. 43(1), pages 100-120, January.
  12. Heineck, Guido & Anger, Silke, 2010. "The returns to cognitive abilities and personality traits in Germany," Labour Economics, Elsevier, Elsevier, vol. 17(3), pages 535-546, June.
  13. Parker,Simon C., 2009. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521728355.
  14. Jonathan Crook, 2001. "The demand for household debt in the USA: evidence from the 1995 Survey of Consumer Finance," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 11(1), pages 83-91.
  15. Cobb-Clark, Deborah A. & Schurer, Stefanie, 2012. "The stability of big-five personality traits," Economics Letters, Elsevier, Elsevier, vol. 115(1), pages 11-15.
  16. 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.
  17. Reint Gropp & John Karl Scholz & Michelle White, 1996. "Personal Bankruptcy and Credit Supply and Demand," NBER Working Papers 5653, National Bureau of Economic Research, Inc.
  18. Alessandra Guariglia, 2001. "Saving behaviour and earnings uncertainty: Evidence from the British Household Panel Survey," Journal of Population Economics, Springer, Springer, vol. 14(4), pages 619-634.
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  21. 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.
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Cited by:
  1. Deborah A. Cobb-Clark & Sonja C. Kassenboehmer & Mathias G. Sinning, 2014. "Locus of Control and Savings," Discussion Papers Series 498, School of Economics, University of Queensland, Australia.

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