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Personality Differences and Investment Decision-Making

Author

Listed:
  • Zhengyang Jiang
  • Cameron Peng
  • Hongjun Yan

Abstract

We survey thousands of affluent American investors to examine the relationship between personalities and investment decisions. The Big Five personality traits correlate with investors' beliefs about the stock market and economy, risk preferences, and social interaction tendencies. Two personality traits, Neuroticism and Openness, stand out in their explanatory power for equity investments. Investors with high Neuroticism and those with low Openness tend to allocate less investment to equities. We examine the underlying mechanisms and find evidence for both standard channels of preferences and beliefs and other nonstandard channels. We show consistent out-of-sample evidence in representative panels of Australian and German households.

Suggested Citation

  • Zhengyang Jiang & Cameron Peng & Hongjun Yan, 2023. "Personality Differences and Investment Decision-Making," NBER Working Papers 31041, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31041
    Note: AP
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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • 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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