Using Personality Assessment and Situational Queries to Understand Risk Tolerance in Emerging Adults

19 Pages Posted: 13 Jan 2021

See all articles by James C. Brau

James C. Brau

Brigham Young University

Finnegan McKinley

affiliation not provided to SSRN

Paige Nelson

affiliation not provided to SSRN

Date Written: October 1, 2020

Abstract

We extend the work of Pan and Statman (2013) by investigating correlations between personality traits and risk tolerance among emerging adults. We score respondents on the Big Five personality traits: extraversion, agreeableness, conscientiousness, neuroticism, and openness. We then analyze correlations between these traits and reported characteristics of risk tolerance: overconfidence, maximization, regret, trust, life satisfaction, and the propensity to attribute success to luck over skill. We find correlations that describe relationships between conscientiousness and the propensity to attribute success to luck over skill, as well as a lack of overconfidence; between openness and the propensity for maximization; and between neuroticism and the propensity for overconfidence. We underscore the nuanced dimensions of investor preferences. We discuss neuroticism and its effects on self-reporting in the context of risk assessment and financial consulting.

Keywords: RIsk Assessment, Risk Tolerance, Personality Traits, Behavioral Finance

JEL Classification: G10, G11, G41

Suggested Citation

Brau, James C. and McKinley, Finnegan and Nelson, Paige, Using Personality Assessment and Situational Queries to Understand Risk Tolerance in Emerging Adults (October 1, 2020). Journal of Investment Consulting, Vol. 20, No. 1, 2020, pp. 61-77, Available at SSRN: https://ssrn.com/abstract=3753745

James C. Brau (Contact Author)

Brigham Young University ( email )

TNRB 640
Marriott School
Provo, UT 84602
United States
801-318-7919 (Phone)
801-422-0108 (Fax)

HOME PAGE: http://marriottschool.byu.edu/emp/brau/

Finnegan McKinley

affiliation not provided to SSRN

Paige Nelson

affiliation not provided to SSRN

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