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Personality traits and investor profile analysis: A behavioral finance study

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  • Daiane De Bortoli
  • Newton da Costa Jr.
  • Marco Goulart
  • Jéssica Campara

Abstract

This study investigates which of four paradigms best portrays the risk profile manifest by investors in their financial asset investment decisions. The paradigms used to explain this profile were: prospect theory, investor profile analysis (IPA), the Big Five Personality Test, and the Cognitive Reflection Test (CRT). The choice of proxy for the risk preferences (profile) of a typical investor was defined by simulating investments in a laboratory setting. The results are analyzed using ordered logistic regression and show that people who have greater risk tolerance according to IPA, who violate prospect theory, and who have a high degree of openness to experience have the greatest probability of taking higher levels of risk in their investment decisions. With regard to the CRT, higher numbers of correct responses in this test has an inverse relationship with risk taking.

Suggested Citation

  • Daiane De Bortoli & Newton da Costa Jr. & Marco Goulart & Jéssica Campara, 2019. "Personality traits and investor profile analysis: A behavioral finance study," PLOS ONE, Public Library of Science, vol. 14(3), pages 1-18, March.
    • Handle: RePEc:plo:pone00:0214062
    DOI: 10.1371/journal.pone.0214062
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    2. Brooks, Chris & Williams, Louis, 2022. "When it comes to the crunch: Retail investor decision-making during periods of market volatility," International Review of Financial Analysis, Elsevier, vol. 80(C).
    3. Jing-Yi Chen & Ming-Hui Wang, 2023. "A Study on Real Estate Purchase Decisions," Sustainability, MDPI, vol. 15(6), pages 1-21, March.
    4. Péricles Dias de Souza Júnior & Paulo Vitor Jordão da Gama Silva, 2024. "Personality, Risk and Financial Planning: A Consigned Credit Analysis," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 14(2), pages 1-5.
    5. Saggese, Pietro & Belmonte, Alessandro & Dimitri, Nicola & Facchini, Angelo & Böhme, Rainer, 2023. "Arbitrageurs in the Bitcoin ecosystem: Evidence from user-level trading patterns in the Mt. Gox exchange platform," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 251-270.
    6. Brooks, Chris & Williams, Louis, 2021. "The impact of personality traits on attitude to financial risk," Research in International Business and Finance, Elsevier, vol. 58(C).
    7. Bajo, Emanuele & Cecchini, Marco & Oliver, Barry, 2023. "Psychological profile and investment decisions," Finance Research Letters, Elsevier, vol. 58(PA).
    8. Lorenzo Esposito & Lorenzo Marrese, 2021. "The impact of cognitive skills on investment decisions. An empirical assessment and policy suggestions," DISCE - Quaderni del Dipartimento di Politica Economica dipe0019, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    9. Saleh M. Shehata & Alaa M. Abdeljawad & Loqman A. Mazouz & Lamia Yousif Khalaf Aldossary & Maryam Y. Alsaeed & Mohamed Noureldin Sayed, 2021. "The Moderating Role of Perceived Risks in the Relationship between Financial Knowledge and the Intention to Invest in the Saudi Arabian Stock Market," IJFS, MDPI, vol. 9(1), pages 1-16, January.
    10. Arvindh Rajasekar & Arul Ramanatha Pillai & Rajesh Elangovan & Satyanarayana Parayitam, 2023. "Risk capacity and investment priority as moderators in the relationship between big-five personality factors and investment behavior: a conditional moderated moderated-mediation model," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(3), pages 2091-2123, June.
    11. Daniel Homocianu, 2020. "A Methodology of Discovering Comparable Models. The Case of Investing in Retirement Accounts when Considering Age, Main Residence and Education before 1989 vs. Globalization," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 67(4), pages 19-31, December.
    12. Innocent Shau & William Gomera, 2022. "Effects of the information gap in the stock market: A case of Dar Es salaam Stock Exchange," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(9), pages 174-183, December.
    13. Yogita Singh & Mohd. Adil & S. M. Imamul Haque, 2023. "Personality traits and behaviour biases: the moderating role of risk-tolerance," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(4), pages 3549-3573, August.

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