Household Finances and the 'Big Five' Personality Traits

33 Pages Posted: 24 Dec 2011

See all articles by Sarah Brown

Sarah Brown

University of Sheffield - Department of Economics; IZA Institute of Labor Economics

Karl Taylor

University of Sheffield - Department of Economics

Abstract

We explore the relationship between household finances and personality traits from an empirical perspective. Specifically, using individual level data drawn from the British Household Panel Survey, we analyse the influence of personality traits on financial decision-making at the individual level focusing on decisions regarding unsecured debt acquisition and financial assets. Personality traits are classified according to the 'Big Five' taxonomy: openness to experience, conscientiousness, extraversion, agreeableness and neuroticism. We find that certain personality traits such as extraversion and openness to experience exert relatively large influences on household finances in terms of the levels of debt and assets held. In contrast, personality traits such as conscientiousness and neuroticism appear to be unimportant in influencing levels of unsecured debt and financial asset holding. Our findings also suggest that personality traits have different effects across the various types of debt and assets held. For example, openness to experience does not appear to influence the probability of having national savings but is found to increase the probability of holding stocks and shares, a relatively risky financial asset.

Keywords: Big Five personality traits, financial assets, unsecured debt

JEL Classification: C24, D03, D14

Suggested Citation

Brown, Sarah and Taylor, Karl B., Household Finances and the 'Big Five' Personality Traits. IZA Discussion Paper No. 6191. Available at SSRN: https://ssrn.com/abstract=1976522

Sarah Brown (Contact Author)

University of Sheffield - Department of Economics

9 Mappin Street
Sheffield, S1 4DT
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Karl B. Taylor

University of Sheffield - Department of Economics ( email )

9 Mappin Street
Sheffield, S1 4DT
United Kingdom

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