Relationship between Framing Bias and Big Five Personality Traits of Individual Investors

Towards Excellence: An Indexed, Refereed & Peer Reviewed Journal of Higher Education, Gujarat University, Ahmedabad, VOL.13. ISSUE NO. 1, March 2021, pp.665-676.

12 Pages Posted: 12 Apr 2021

See all articles by Abhishek Sachan

Abhishek Sachan

QAPL

Pawan K. Chugan

Nirma University - Institute of Management; AIIM - Ahmedabad; SPM - PDPU

Date Written: January 20, 2021

Abstract

Returns depend upon decisions of investors, but investors biases challenge the ability to take rational decisions. Study of biases and their relationships with personality traits helps to understand how biases originate, the way in which they possibly effect investors, and which personality types could be more susceptible to them. There are evidences that biases have relationships with personality traits of investors and this study focuses on one such relationship between framing bias and personality traits. Given the qualitative nature of variables under study, the relationship was established by statistically significant coefficients of logistic regression equation, where bias-variable was dependent and big five personality traits were independent. The score of personality trait, which had significant relationship, was cross tabulated with bias variable, the chi square test indicated a statistically significant relationship. The results lead to conclusion that an investor with higher score of agreeableness has higher probability of having framing bias. It is also discussed that an agreeable person may demonstrate irrationality discussed in prospect theory, more as compared to others, as the framing effects were measured using gain and loss frames. Since the study deals with frames of communication, it indicates towards the effects of personality traits on communication between portfolio manager and clients. The study contributes for portfolio managers that an agreeable client may not actually agree for rational decision if the communication is not in right frame.

Keywords: Behavioural Biases, Personality Traits, Agreeableness, Framing Bias, Behavioural Finance, Investor decisions, Behavioural Economics.

JEL Classification: G00, G02, G11

Suggested Citation

Sachan, Abhishek and Chugan, Pawan Kumar, Relationship between Framing Bias and Big Five Personality Traits of Individual Investors (January 20, 2021). Towards Excellence: An Indexed, Refereed & Peer Reviewed Journal of Higher Education, Gujarat University, Ahmedabad, VOL.13. ISSUE NO. 1, March 2021, pp.665-676., Available at SSRN: https://ssrn.com/abstract=3824195

Abhishek Sachan

QAPL ( email )

108A-110A, Brilliant Titanium,
Sch.No.78, Part II, Vijay Nagar,
Indore, Madhya Pradesh 452010
India

Pawan Kumar Chugan (Contact Author)

Nirma University - Institute of Management ( email )

Sarkhej Gandhinagar Highway
Ahmedabad, GUJARAT 382481
India

HOME PAGE: http://pawanchugan.wordpress.com

AIIM - Ahmedabad ( email )

Adani Shantigram, Vaishno Devi Circle
S.G. Highway
Ahmedabad, Gujarat 382421
India

HOME PAGE: http://pawanchugan.wordpress.com/

SPM - PDPU ( email )

Raisan
Gandhinagar, Gujarat 382007
India

HOME PAGE: http://pawanchugan.wordpress.com/

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