Personality Differences and Investment Decision-Making

46 Pages Posted: 3 Jun 2020 Last revised: 21 Aug 2020

See all articles by Zhengyang Jiang

Zhengyang Jiang

Kellogg School of Management - Department of Finance

Cameron Peng

London School of Economics & Political Science (LSE) - Department of Finance

Hongjun Yan

DePaul University

Date Written: April 19, 2020

Abstract

We administer a survey to thousands of affluent Americans about their personalities and investments. The Big Five personality traits can explain the heterogeneity among investors in their beliefs about the stock market and economy, risk preferences, and social-interaction tendencies. Two personality traits---Neuroticism and Openness---stand out in their explanatory powers for equity investments. Both investors with high Neuroticism and those with low Openness tend to allocate less to equity. While the former behavior is due to pessimism about future stock returns, the latter is due to high risk aversion. We find consistent out-of-sample evidence in a representative panel of Australian households.

Keywords: Personality, Investor Heterogeneity, Social Interaction

JEL Classification: D91, G11, G41

Suggested Citation

Jiang, Zhengyang and Peng, Cameron and Yan, Hongjun, Personality Differences and Investment Decision-Making (April 19, 2020). Available at SSRN: https://ssrn.com/abstract=3580364 or http://dx.doi.org/10.2139/ssrn.3580364

Zhengyang Jiang (Contact Author)

Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States

HOME PAGE: http://sites.google.com/site/jayzedwye/

Cameron Peng

London School of Economics & Political Science (LSE) - Department of Finance ( email )

United Kingdom

Hongjun Yan

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604
United States

HOME PAGE: http://sites.google.com/site/hongjunyanhomepage/

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