The Decision Making of a Financial Psychopath
36 Pages Posted: 23 Apr 2019
Date Written: March 19, 2019
We examine the relationship between psychopathic personality traits and financial risk and time preferences using a sample of 118 business majors. We find that Finance majors score significantly higher on machiavellian egocentricity and lower fearlessness than other majors, including other business majors. Additionally, we find that the global trait of psychopathy has a positive association with the linearity of the cumulative prospective utility function. Furthermore, the secondary trait of self-centered impulsivity is statistically significant in all models of financial risk preferences determinants under Cumulative Prospect Theory. The aforementioned results show that certain psychopathic personality traits are related to more rational financial decision making. Alternatively, other aspects of psychopathy are associated with impulsive, less rational decision making. Superficially, we find that self-centered impulsivity and stress immunity are related to a higher time-preference discount rate under quasi-hyperbolic time preferences.
Keywords: Financial Psychopath, Risk Aversion, Present Bias, Risk Preferences, Time Preferences
JEL Classification: A12, D03, G02, G11
Suggested Citation: Suggested Citation