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The relationship between personality traits and investment risk preference

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  • Chung-Chu Liu
  • Kai-Yin Woo
  • Tai-Yuen Hon

Abstract

Personality traits and risk preference behaviours have been the main subjects of behavioural finance. Our present study is to explore the relationship between the personality traits and investment risk preference. Questionnaire survey method is adopted to collect data and 600 valid samples are selected for the study. Also, the respondents come from Taiwan and Hong Kong, which allows us to test whether the differences in location of residence between these two regions can moderate the relationship. Our results show that investors personality traits have a significant relationship with their risk preferences. The evidence may help academics to integrate the role of personality traits into behavioural finance models, assist investors to recognise their risk preferences for making investment decisions, and facilitate finance professionals to design and recommend investment products for customers that match their risk preference characteristics with corresponding personality traits.

Suggested Citation

  • Chung-Chu Liu & Kai-Yin Woo & Tai-Yuen Hon, 2016. "The relationship between personality traits and investment risk preference," International Journal of Revenue Management, Inderscience Enterprises Ltd, vol. 9(1), pages 57-71.
    • Handle: RePEc:ids:ijrevm:v:9:y:2016:i:1:p:57-71
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    References listed on IDEAS

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    1. Shu Li & Chang-Jiang Liu, 2008. "Individual differences in a switch from risk-averse preferences for gains to risk-seeking preferences for losses: can personality variables predict the risk preferences?," Journal of Risk Research, Taylor & Francis Journals, vol. 11(5), pages 673-686, July.
    2. Henry Kaiser, 1974. "An index of factorial simplicity," Psychometrika, Springer;The Psychometric Society, vol. 39(1), pages 31-36, March.
    3. Nigel Nicholson & Emma Soane & Mark Fenton-O'Creevy & Paul Willman, 2005. "Personality and domain-specific risk taking," Journal of Risk Research, Taylor & Francis Journals, vol. 8(2), pages 157-176, March.
    4. Highhouse, Scott & Yuce, Payam, 1996. "Perspectives, Perceptions, and Risk-Taking Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(2), pages 159-167, February.
    5. Farrell, Andrew M., 2010. "Insufficient discriminant validity: A comment on Bove, Pervan, Beatty, and Shiu (2009)," Journal of Business Research, Elsevier, vol. 63(3), pages 324-327, March.
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    1. 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.
    2. Antonín PavlÃ­Ä ek & Aneta BobeniÄ HintoÅ¡ová & FrantiÅ¡ek Sudzina, 2021. "Impact of Personality Traits and Demographic Factors on Risk Attitude," SAGE Open, , vol. 11(4), pages 21582440211, December.

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