The Relationship between Psychopathy and Financial Risk and Time Preferences

Abstract

We examine the relationship between Psychopathy and its underlying components and financial risk and time preferences in a sample of business majors. We find that overall score on Psychopathy is positively related to the linearity of the cumulative prospective utility function. A breakdown of Psychopathy into its main components shows a more complex relation. For example, one component of Psychopathy, Self-Centered Impulsivity, is statistically significant in models of financial risk preference determinants under Cumulative Prospect Theory. Additionally, we find that two components of Psychopathy - Self-Centered Impulsivity and Stress Immunity - are related to a higher time-preference discount rate under quasi-hyperbolic time preferences.

Note:
Funding Information: There was no funding for the paper.

Declaration of Interests: There is no competing interest to declare.

Ethics Approval Statement: . With Institutional Review Board (IRB) and instructor approval, a total of 135 individuals were recruited and took part in the study. Participants were offered a small amount of bonus points towards their course grade as an incentive to participate in this study. This experiment was approved by the University of Texas Pan America IRB# 2015-024-03.

Keywords: Financial Psychopath, Risk Aversion, Present Bias, Risk Preferences, Time Preferences

JEL Classification: A12, D03, G02, G11