Personality Differences and Investment Decision-Making

59 Pages Posted: 3 Jun 2020 Last revised: 11 Mar 2023

See all articles by Zhengyang Jiang

Zhengyang Jiang

Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER)

Cameron Peng

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

Hongjun Yan

DePaul University

Multiple version iconThere are 2 versions of this paper

Date Written: January 20, 2021

Abstract

We survey thousands of affluent American investors to examine the relationship between personalities and investment decisions. The Big Five personality traits correlate with investors' beliefs about the stock market and economy, risk preferences, and social interaction tendencies. Two personality traits, Neuroticism and Openness, stand out in their explanatory power for equity investments. Investors with high Neuroticism and those with low Openness tend to allocate less investment to equities. We examine the underlying mechanisms and find evidence for both standard channels of preferences and beliefs and other nonstandard channels. We show consistent out-of-sample evidence in representative panels of Australian and German 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 (January 20, 2021). 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/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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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