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Does Investors' Personality Influence their Portfolios?

Author

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  • Alessandro Bucciol

    (Department of Economics (University of Verona))

  • Luca Zarri

    (Department of Economics (University of Verona))

Abstract

We present evidence that non-cognitive skills such as individual investors’ personality traits significantly impact their portfolio choices. Based on large-scale survey data from the 2006-2012 waves of the US Health and Retirement Study (HRS) we show that portfolio decisions are influenced by a variety of traits and facets traditionally investigated in the field of personality psychology. Two personality traits that taken together depict a self-centered personality profile appear to have the most significant impact on financial risk taking: lower Agreeableness and higher Cynical Hostility predict higher willingness to take risks. A number of robustness checks corroborate our results. We also show that the effects of Agreeableness seem to pass through the preferences – rather than the beliefs – channel. Our findings shed new light on the non-cognitive side of individuals’ risk taking and have implications for our understanding of the sources of heterogeneity in financial decisions.

Suggested Citation

  • Alessandro Bucciol & Luca Zarri, 2015. "Does Investors' Personality Influence their Portfolios?," Working Papers 03/2015, University of Verona, Department of Economics.
    • Handle: RePEc:ver:wpaper:03/2015
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    Cited by:

    1. Jones, A.M.; & Rice, N.; & Robone, S.;, 2018. "The effect of health shocks on financial risk preferences differs by personality traits," Health, Econometrics and Data Group (HEDG) Working Papers 18/07, HEDG, c/o Department of Economics, University of York.
    2. Alessandro Bucciol & Luca Zarri, 2016. "The Shadow of the Past: Does Personality Change After Lifetime Traumas?," Working Papers 15/2016, University of Verona, Department of Economics.
    3. Luik, Marc-André & Steinhardt, Max Friedrich, 2016. "Immigrant-native differences in stockholding – The role of cognitive and non-cognitive skills," Journal of Empirical Finance, Elsevier, vol. 38(PA), pages 103-119.
    4. Yogita Singh & Mohd. Adil & S. M. Imamul Haque, 2023. "Personality traits and behaviour biases: the moderating role of risk-tolerance," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(4), pages 3549-3573, August.

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    More about this item

    Keywords

    Portfolio Choice; Personality Traits; Risk Taking; Behavioral Finance;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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