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Impact of Personality Traits on Risk Tolerance and Investors' Decision Making

Impact of Personality Traits on Risk Tolerance and Investors' Decision Making

Misbah Sadiq, Hareem Amna
Copyright: © 2019 |Volume: 8 |Issue: 1 |Pages: 20
ISSN: 2160-9802|EISSN: 2160-9810|EISBN13: 9781522567981|DOI: 10.4018/IJABE.2019010101
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MLA

Sadiq, Misbah, and Hareem Amna. "Impact of Personality Traits on Risk Tolerance and Investors' Decision Making." IJABE vol.8, no.1 2019: pp.1-20. http://doi.org/10.4018/IJABE.2019010101

APA

Sadiq, M. & Amna, H. (2019). Impact of Personality Traits on Risk Tolerance and Investors' Decision Making. International Journal of Applied Behavioral Economics (IJABE), 8(1), 1-20. http://doi.org/10.4018/IJABE.2019010101

Chicago

Sadiq, Misbah, and Hareem Amna. "Impact of Personality Traits on Risk Tolerance and Investors' Decision Making," International Journal of Applied Behavioral Economics (IJABE) 8, no.1: 1-20. http://doi.org/10.4018/IJABE.2019010101

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Abstract

This article investigates the relationships between personality traits, risk tolerance, and investment decisions and highlights the importance of personality traits in determining risk tolerance levels and investment decisions. Personality traits are classified according to the Big Five taxonomy: extroversion, agreeableness, conscientiousness, neuroticism and openness to experience. Primary data was collected from 330 individual investors from Islamabad. Descriptive analysis of the data was run on SPSS, reliability of the constructs was assessed through Confirmatory Factor Analysis (CFA), whereas, Structural Equational Modelling (SEM) was used to conduct hypothesis testing through path analysis. As per the results of CFA, the constructs were found to be reliable. Mediation analysis confirmed that risk tolerance partially mediated the relationship between personality traits and investment decisions. This study and results have theoretical and practical implications for the investors, financial planners and managers.

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