Grit, Preferences, and Investor Behavior

59 Pages Posted: 16 Jun 2021 Last revised: 31 Jan 2022

See all articles by William Bazley

William Bazley

University of Kansas

Sima Jannati

University of Missouri-Columbia

George M. Korniotis

University of Miami; Miami Business School; University of Miami - Behavioral Decision Making Cluster

Date Written: January 28, 2022

Abstract

We examine whether grit affects the preferences and trading decisions of individuals. Grit, a non-cognitive personality trait, is malleable and captures the sustained effort toward a goal despite setbacks. Using experiments formalized within prospect theory, we find that grit reduces loss aversion. Gritty investors also exhibit a lower disposition effect, which is consistent with them having lower aversion to losses. Specifically, they are more willing to exit losing investments and accumulate about 7% more wealth relative to control participants. Overall, our results suggest that grit affects the quality of investment decisions. Therefore, interventions cultivating grit could improve households' financial outcomes.

Keywords: Prospect theory, loss aversion, disposition effect, experimental market, personality traits

JEL Classification: G11, G40, G41

Suggested Citation

Bazley, William and Jannati, Sima and Korniotis, George M., Grit, Preferences, and Investor Behavior (January 28, 2022). Available at SSRN: https://ssrn.com/abstract=3866704 or http://dx.doi.org/10.2139/ssrn.3866704

William Bazley

University of Kansas ( email )

3143 Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States

Sima Jannati

University of Missouri-Columbia ( email )

511 Cornell Hall
COLUMBIA, MO 65211
United States

George M. Korniotis (Contact Author)

University of Miami ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States
305-284-5728 (Phone)

Miami Business School ( email )

University of Miami - Behavioral Decision Making Cluster ( email )

5250 University Drive
Coral Gables, FL 33124
United States

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