Openness Endangers Your Wealth: Noise Trading and the Big Five

20 Pages Posted: 31 Oct 2015

See all articles by Jens Kleine

Jens Kleine

SDA Bocconi; University of Applied Sciences, Munich; Steinbeis University Berlin

Niklas Wagner

Passau University

Tim Weller

Steinbeis University Berlin

Date Written: October 30, 2015

Abstract

We examine the cross-sectional determinants of individual investors´ noise trading activity based on their respective Big Five personality traits. Our unique data set is obtained by a self-reported questionnaire that includes responses of 2,147 individual investors who actively engage in trading. We find that Agreeableness, Extraversion and Openness are central in explaining cross-sectional differences in trading activity. Openness is found to be a main driver of excess trading. Our results further suggest that overconfidence as predicted by low levels of Agreeableness relates to excessive trading, while high levels of Extraversion do not. Our performance prediction conditional on investor personality is that Agreeableness saves individual investors from losing money via trading, while Openness will endanger investors’ terminal wealth.

Keywords: individual investors, market participation, noise trading, overconfidence, personality traits, Big Five model, Agreeableness, Extraversion, Openness

JEL Classification: G02, G10, G12

Suggested Citation

Kleine, Jens and Kleine, Jens and Wagner, Niklas F. and Weller, Tim, Openness Endangers Your Wealth: Noise Trading and the Big Five (October 30, 2015). Available at SSRN: https://ssrn.com/abstract=2684073 or http://dx.doi.org/10.2139/ssrn.2684073

Jens Kleine

SDA Bocconi ( email )

Via Bocconi 8
Milan, Milan 20136
Italy

University of Applied Sciences, Munich ( email )

Am Stadtpark 20
Munich, 81243
Germany

Steinbeis University Berlin ( email )

Berlin
Germany

Niklas F. Wagner (Contact Author)

Passau University ( email )

Innstrasse 27
Passau, 94030
Germany

Tim Weller

Steinbeis University Berlin ( email )

Berlin
Germany

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