STUDY LINKS PERSONALITY TO INVESTMENT CHOICES

STUDY LINKS PERSONALITY TO INVESTMENT CHOICES

PERSONALITY traits can influence how people trade on the share market and impact investment outcomes, according to new research.

Researchers from Curtin University, Monash University and University of Western Australia conducted three studies to determine risk-taking and overconfidence by using the Five-Factor Model.

The Model is based on genetics and divides personality traits into categories including extroversion, agreeableness, conscientiousness, neuroticism and openness to experience.

Project lead and Curtin School of Economics and Finance professor Robert Durand says people will take or avoid risks to achieve investment goals that align with their personality.

"Extroverts for example, may take increased risks due to their need to seek excitement," Durand says.

"People high in conscientiousness may be more cautious in taking risks due to their need for control, order and self-discipline, and people high in neuroticism may avoid risks due to fear or negative consequences."

Durand says previous behavioural finance research neglected to investigate the impact of personal characteristics, despite it being at the core of decision-making.

He says delving deeper into the link between personality and investment decisions has important implications for investors and analysts.

"It also has important implications for our understanding of finance as we potentially have an understanding of how various, seemingly unrelated, phenomena, are linked," he says.

"Investors construct portfolios that are congruent with their personalities and self-knowledge might lead investors to articulate and understand the type of decisions they make.

"From this understanding, investors might be able to modify their behaviour and also avoid some mistakes."

The studies were published in the Journal of Behavioural Finance and the Review of Behavioural Science.

Enjoyed this article?

Don't miss out on the knowledge and insights to be gained from our daily news and features.

Subscribe today to unlock unlimited access to in-depth business coverage, expert analysis, and exclusive content across all devices.

Support independent journalism and stay informed with stories that matter to you.

Subscribe now and get 50% off your first year!

Four time-saving tips for automating your investment portfolio
Partner Content
In today's fast-paced investment landscape, time is a valuable commodity. Fortunately, w...
Etoro
Advertisement

Related Stories

Brisbane-based IT consultancy Exent acquired by Atturra for up to $8m

Brisbane-based IT consultancy Exent acquired by Atturra for up to $8m

Founder-led IT consultancy Exent is set to join the growing portfol...

Investors sour on Aussie Broadband's new challenger brand Buddy Telco with $10m marketing cost

Investors sour on Aussie Broadband's new challenger brand Buddy Telco with $10m marketing cost

After rival Superloop (ASX: SLC) scooped up its white labelling agr...

Golden handshakes to departing ASX100 CEOs hit 12-year high

Golden handshakes to departing ASX100 CEOs hit 12-year high

Around one in every six CEOs of ASX100 companies left their job&nbs...

Maggie Beer Holdings CEO Kinda Grange resigns just 16 months into the job

Maggie Beer Holdings CEO Kinda Grange resigns just 16 months into the job

The revolving door of leadership at Maggie Beer Holdings (ASX: MBH)...