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The abnormal psychology of investment performance

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  • Patterson, Fernando M.
  • Daigler, Robert T.

Abstract

We examine a range of mental health characteristics (e.g. depression, paranoia, and schizophrenia) in subjects engaged in simulated investment trading, showing that certain abnormal personality characteristics have a statistically significant association with the degree of investment diversification, the return achieved, the degree of risk undertaken, and the resultant risk-adjusted performance. These financially educated individuals are more paranoid and psychopathically deviant than the average person, with high scores on these characteristics associated with greater risk-taking. Finally, male and female investors possess different mental health strengths and weaknesses in relation to their financial performance.

Suggested Citation

  • Patterson, Fernando M. & Daigler, Robert T., 2014. "The abnormal psychology of investment performance," Review of Financial Economics, Elsevier, vol. 23(2), pages 55-63.
    • Handle: RePEc:eee:revfin:v:23:y:2014:i:2:p:55-63
    DOI: 10.1016/j.rfe.2013.08.004
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    References listed on IDEAS

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    Cited by:

    1. John R. Nofsinger & Corey A. Shank, 2019. "DEEP sleep: The impact of sleep on financial risk taking," Review of Financial Economics, John Wiley & Sons, vol. 37(1), pages 92-105, January.
    2. Babar Khalid & Ahmed Imran Hunjra, 2015. "Measuring the Validity of the Instrument of Information Asymmetry, Accounting Information, Personal Values, Investment Satisfaction and Investor Decision: An Empirical Analysis of Pakistani Stock Exch," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 1(1), pages 36-54, March.
    3. Fawad Ahmad, 2020. "Personality traits as predictor of cognitive biases: moderating role of risk-attitude," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 12(4), pages 465-484, June.

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