Chapter 6: Personality Traits
Investor Behavior: The Psychology of Financial Planning and Investing. H. Kent Baker and Victor Ricciardi, eds., 99-115, Hoboken, NJ: John Wiley & Sons, Inc., 2014
Posted: 9 Mar 2014 Last revised: 10 May 2014
Date Written: February 10, 2014
Abstract
Personality captures a person’s essence. Understanding one’s personality helps explain and predict the decisions an individual makes and what a person will do. This chapter focuses on the predominant structural model of personality — the Five-Factor Model — which encapsulates personality using five higher-order traits: Extraversion, Agreeableness, Conscientiousness, Neuroticism, and Openness to Experience/Intellect. The Five-Factor Model is rooted in biology and is genetically based. Personality traits are a major aspect of risk taking and overconfidence behaviors. Understanding personality can improve decision-making if it helps to regulate and override dispositional tendencies leading to suboptimal outcomes.
Keywords: Personality traits, Five-Factor Model of personality, biological basis of personality traits, risk-taking behavior, overconfidence, gender, behavioral finance, behavioural finance, behavioral economics, behavioural economics
JEL Classification: A12, D81, G00, G30, G10, M00, M10, M41
Suggested Citation: Suggested Citation