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Grit, Preferences, and Investor Behavior

Author

Listed:
  • Bazley, William
  • Jannati, Sima
  • Korniotis, George

Abstract

We examine whether grit affects the preferences and trading decisions of U.S investors. Grit is an important non-cognitive personality trait that is malleable and captures the sustained effort toward a goal despite setbacks. Using experiments formalized within prospect theory, we find that grit reduces loss aversion. Gritty investors are also more willing to exit losing investments and accumulate about 7% more wealth relative to control participants. Overall, our results suggest that grit affects the quality of investment decisions. Therefore, interventions cultivating grit could improve households' financial outcomes.

Suggested Citation

  • Bazley, William & Jannati, Sima & Korniotis, George, 2024. "Grit, Preferences, and Investor Behavior," CEPR Discussion Papers 19513, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19513
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    File URL: https://cepr.org/publications/DP19513
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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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