The impact of personality traits on attitude to financial risk |
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Affiliation: | 1. ICMA Centre, Henley Business School, UK;2. ICMA Centre, Henley Business School and Distribution Technology, UK |
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Abstract: | While the effects of emotions on attitudes to investment risk are now well documented, the influence of personality factors has been less researched. This paper examines the role of personality traits in determining financial risk tolerance. Using an extensive survey of UK-based retail investors, we show that personality traits and characteristics are more important than emotions in determining attitude to risk. We also observe that the widely adopted ‘Big Five’ framework is insufficient to characterise this relationship adequately, with significant roles for financial self-efficacy, resilience, and trait anger. Since some of these characteristics can be modified, our findings are suggestive that appropriate training and support for those making financial decisions could lead to better outcomes over the longer term. |
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Keywords: | Retail investors Attitude to risk Risk tolerance Emotions Personality traits Financial decisions G11 G20 J14 C25 |
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