EFFECT OF PERSONALITY TRAITS ON THE RISK TAKING

BEHAVIOUR.

Nouman Ali
1
FAST School of Management, National University of Computer & Emerging Sciences
, NUCES, Islamabad, Pakistan

ABSTRACT

The objective of this research paper is to explore the association between personality traits
and risk-taking attitude during investments in the developing country, i.e. Pakistan. The study
provides valuable insights to investment experts and policymakers to understand investors’
behavior. Financial specialist's conduct is affected by many elements during investments.
Identity attributes of financial specialists are additionally few of the choice affecting elements
on risk taking behavior among others. 150 plus investors from Pakistan were selected as
sample and based on data collected; linear regression model was developed and tested in this
study. Software package SPSS was utilized to investigate the impact of personality
characteristics on investor’s level of risk resistance in regards to the decision of investment.
Results of the paper demonstrated that personality attributes of investor such as neuroticism,
overconfidence, cognitive ability and being extrovert effect on the risk taking behavior. On
the other hand, investor’s age and level of education showed litter effect on investor’s risk
taking behavior however significance level is much higher. These outcomes are vital for
managers and secondary investors to instruct their clients and customers about better range of
investments in terms of return and risk level in accordance with their characteristics.
Keywords: Risk taking behavior, extrovert, neuroticism, overconfidence and cognitive
ability
Track No: 2
 EFFECT OF PERSONALITY TRAITS ON THE RISK TAKING
BEHAVIOUR.

ABSTRACT

The objective of this research paper is to explore the association between personality traits
and risk-taking attitude during investments in the developing country, i.e. Pakistan. The study
provides valuable insights to investment experts and policymakers to understand investors’
behavior. Financial specialist's conduct is affected by many elements during investments.
Identity attributes of financial specialists are additionally few of the choice affecting elements
on risk taking behavior among others. 150 plus investors from Pakistan were selected as
sample and based on data collected; linear regression model was developed and tested in this
study. Software package SPSS was utilized to investigate the impact of personality
characteristics on investor’s level of risk resistance in regards to the decision of investment.
Results of the paper demonstrated that personality attributes of investor such as neuroticism,
overconfidence, cognitive ability and being extrovert effect on the risk taking behavior. On
the other hand, investor’s age and level of education showed litter effect on investor’s risk
taking behavior however significance level is much higher. These outcomes are vital for
managers and secondary investors to instruct their clients and customers about better range of
investments in terms of return and risk level in accordance with their characteristics.
Keywords: Risk taking behavior, extrovert, neuroticism, overconfidence and cognitive
ability

Introduction

For ages, behavioral finance has constantly discussed that investors are typical and sensitive
in risk taking behavior for their investment decision making. Psychologist found that people
are rational in their decision making for investing in different sectors (Ross, Westerfield &
Jaffe, 2010). Muhammad and Abdullah (2009) reveal that speculators consider and break
down all economic, financial and other information gathered from surroundings before
settling on choice to participate in capital market ventures. In 1980’s Richard Thaler narrowed
down the field of behavioral finance when he said that Behavioural finance combines
psychological biases theories and economic principles. Behavioral Finance assumes that the
structure of the information and market participants’ characteristics influence individual’s risk
taking behaviour in investment decisions.
There are some personality traits that have been able to explain the behavior that affects the
decision making of investors while making investments. Researchers have investigated an
individual’s investment decision-making process which is based on a complex combination of
demographics (i.e. age, gender, income and level of education) (Bali, Demirtas, Levy, &
Wolf, 2009; Hallahan, Faff, & McKenzie, 2003; Ozmen and Sumer, 2011; Mayfield and
Shapiro, 2010), personal characteristics (personality traits, values, emotions, risk tolerance,
etc.) (Chitra and Sreedevi, 2011; Mishra, Lalumière, & Williams, 2010; Young, Gudjonsson,
Carter, Terry, & Morris, 2012). Traditional finance theories such as Efficient Market Theory
(Fama, 1965, 1970) and Modern Portfolio Theory (Markowitz, 1952) advocate that investors
are rational and base their decisions on relevant publicly available information. However, few
study outcomes express uncertainty about the rationality of investor activities and show that
decisions can be driven by psychological and behavioral factors (Chang, 2008; Clark-Murphy,
2004; Kourtidis, Šević, & Chatzoglou, 2011; Rober, 2003; Weller and Thulin, 2011).
Although earlier studies have found the relationship between Psychological Factors and
Investment Decision Making, most of the studies have been conducted in developed countries
(Lalumiere and Williams, 2010; Young et al., 2012). No study has been conducted so far in
developing countries like Pakistan. Behaviors, approaches and beliefs of the individuals of
developing countries vary largely from the investors of developed countries, thus it makes an
impact on the decision-making processes in different ways (Ergeneli, Gohar, & Temirbekova,
2007; Kalyuzhnova and Kambhampati, 2008; Linz and Semykina, 2011; Semykina and Linz,
2010). Ardichvili (2001) conducted a research and identified remarkable findings that cultural
values create significant differences between developing and developed countries. Numerous
studies like Basu, (1977) have been conducted on the effects of stock market on investment
decisions but no one has discussed the effects of personality traits on risk taking behavior.
A number of researches have been conducted before on psychological biases like (Kalantari,
2010) says that Emotional influences are active in prompting the situations available to
decision-makers, and rational financial behavior only exists in virtual world not in the real
world. Although (Chen et al., 2007; Kourtidis et al., 2011; Rober, 2003; Sadi et al., 2011;
Sahi, 2012) have developed a philosophy that investors have a habit of behavioral biases
linked to personal traits, however the impact of personality traits particularly on youth has not
been taken in account ever before. The researches on psychological factors, information
asymmetry, and investment decision making have been made by (Lerner, and Keltner, 2001)
where they concluded that personality is to be added to the factors that affect short term
investment intentions of investors and put forth future directions for other personality
variables (fear, mood, anger) and their influence on investment decisions. In the present study,
various personality variables are being taken into consideration that impact the decisions
during risky situations and results are being assessed to identify investor‘s behavior mainly on
the Youth of Pakistan.
Most of the times people make investments with huge amount of capital but now the future of
Pakistan is in the hands of youth. Very few researchers have been able to examine how youth
thinks about risk-taking factor while making investments and which personality traits effects
the youth while taking risk in investment.
Risk taking behavior includes the positive results as well as possible negative results against
our expectations (Ernst, Pine, Hardin, 2006; Boyer, 2006). Taking risk in relation to emotions
increases among youth (Gardner, Steinberg, 2005; Arnett, 2000), as youth are highly
emotional and lack mature ability to self-regulate (Steinberg, 2008), resulting in teenage
openness to the negative results of risk-taking (Steinberg, 2004).
As investor’s decision making is highly dependent on personality traits, hence the current
research may assist market people to understand the behaviour/mentality of most of the
investors. This research paper aims to observe the relationships between personality traits and
risk-taking attitudes particularly in the youth of Pakistan.
In the upcoming era, all the decisions will be taken by youth of the country; hence it is very
necessary to examine what youth thinks and how they measure risk and what personality traits
effects while taking risk. So, basically the current research being conducted on the youngsters
of Pakistan in order to understand how they define risk; what are the risk levels they can take
and how the personality traits effects their risk taking behavior.
The findings of the review will help in comprehending young financial specialists' decision
making process, their mental framework toward risk and adoption of speculation techniques
against the backdrop of Pakistan’s interesting social fabric. We hope that the findings of this
study will help policymakers to take appropriate measures to educate and train future
investors and develop & manage the emerging share market of Pakistan smoothly and
effectively.

Literature Review

Individual investments activities are worried with decisions about buying behavior of little
measures of securities for their own particular record. Speculation choices are regularly
upheld by judgement tools which are based on the personality traits of an investor (Jagongo &
Mutswenje, 2014). One of the essential concepts of the investment decision-making process is
the concept of risk.
Behavioral finance has attained remarkable progress in enlightening the behavioral aspects of
investment decisions. Behavioral finance explores the reaction of investors under uncertainty.
Six elements are taken from a variety of personality traits i-e age, education, overconfidence,
cognitive abilities, being extrovert, and neuroticism. Every component affects behavioral
characteristics of individual financial specialists. Experimental investigations of the conduct
of individual investors initially showed up in the 1970s by Ajzen and Fishbein. Even with the
significance of people's venture choices, be that as it may, we know minimal about the
components that impact the investors while taking risk. This review of the literature,
therefore, concentrates on work involving investors and how they behave during uncertain
conditions.
Neuroticism

Neuroticism is linked with the deficiency of effective intellectual abilities, fragile logical
skills and poor critical thinking and conceptual understanding (Busato, Prins, Elshout, &
Hamaker, 2000). Individuals who have less self-confidence and self-esteem score high in the
test of neuroticism (McCrae & Costa, 1991). It will be likely to interrupt higher-order
intellectual working, furthermore, makes individuals feel stressed and anxious of
disappointment on investments. Risk taking conduct is identified with neurological lackness;
individuals with low neuroticism experience more anxiety during uncertain situations (Young,
et al. 2012).
People with Neuroticism do not have sufficient and well-organized techniques for chasing
their own goals. They are self-centered, selfish and are always looking for superior goals. So,
in order to achieve the same, they act flexibly and they like to be honored to address absence
of their social desire (O’Connor, & Paunonen, 2007).
Extrovert

Extrovert people are pleasant, friendly, kind and are not restricted by rationality or ideologies.
They are more likely to be led by external noticeable stimulators (Neubert, 2004). Thus they
are willing to take risks more impulsively. The main characteristics of extrovert people are
high level of intellectuality, strength, high patience level, taking actions wisely, carefully
examining the situations, highly ambitious, don’t trust easily, think off the future and don’t
resist to future challenges Sadi et al., (2011). They are outgoing and more hopeful about life
and happenings in the future. They may refer to financial advisors, but, eventually, take
confident or forward-looking decisions. Positive attitudes about life and events could increase
the overestimation of the market and underestimation of possible risks (Pak & Mahmood,
2013)
Overconfidence
Some people usually consider themselves as being above average in their capabilities. They
also overestimate the accuracy of their knowledge as compared to others. Many investors
believe that they can beat the market with their unique skills and knowledge. But the reality is
often different. There are lots of examples which prove that such people are wrong in their
ideas. Overconfidence thus makes them to do excess trade, with higher trading costs thus
reducing profits (Jagongo & Mutswenje, 2014).
Cognitive ability

Cognitive ability is one of the main factors of decision-making during investments. Its
significance is established by empirical studies which show that individual investors’ risk
tolerance level and cognitive ability expects an extensive range of important economic
outcomes. (Guiso & Paiella, 2005; Eckel, Johnson & Montmarquette, 2005), Moreover, it is
found that higher the cognitive ability, better the economic market outcomes (Heckman,
Stixrud, & Urzua, 2006).
Risk taking behavior

Many of our decisions involve a balance between probable return and risk. Some personality
traits like sensation seeking and impulsivity are related to the risk taking (Zuckerman, &
Kuhlman, 2000). Zuckerman, (1994 p, 27) defines the sensation seeking as, “a trait defined
by the seeking of varied, novel, complex, and intense sensations and experiences, and the
willingness to take physical, social, legal, and financial risk for the sake of experience”. Three
main themes are identified for risk propensity. The first is related to expect utility theories, of
which prospect theory (Kahneman and Tversky, 1979) is a much-cited example. Prospect
theory states that people who see themselves in a domain of gain they are more risk averse
than who see themselves in a domain of loss (Nicholson, Soane, Fenton O'Creevy, &
Willman, 2005).

Neuroticism and Risk taking

Neuroticism is linked with the deficiency of effective intellectual abilities, fragile logical
skills, poor critical thinking and conceptual understanding (Busato et al. 2000). Pak and
Mahmood did a research with the distribution of 160 questionnaires to university students and
found 127 valid in Kazakhstan in 2013. They found neuroticism had negative impact on risk
taking behavior. Another study was conducted by Sadi et al. (2010) with the sample of 200 of
investors in Iran. According to them, neuroticism had negative impact on risk taking behavior.
According to these two studies we are making the hypothesis i.e
H1: Neuroticism has negative impact on risk taking behavior.
Extrovert and risk taking

Study conducted by Sadi et al. (2010) with the sample of 200 investors and fund ensuring
institute in Iran. According to them extrovert had impact on Risk taking behavior which may
be negative or positive. Another study which collected data from 127 students in Kazakhstan
(Pak & Mahmood. 2013) concluded that the relationship between the two aspects is positive.
According to different studies we conclude that:
H2: Extrovert has positive impact on risk taking behavior.
Overconfidence and Risk taking
There are several studies on the impact of overconfidence on risk taking behavior. Broihane,
Meril and Roger (2014) found that a strong positive relationship between overconfidence and
risk taking behavior through a study which interviewed 64 high level professionals in USA.
Researcher said that there are positive relationship between overconfidence and risk taking
behavior; investors overestimate the precision of their information (Barber & Odean, 1997).
They took data from almost 7800 household in USA over a span of 6 years. Hence, on the
basis of the mentioned studies, we constitute the hypothesis i.e.
H3: Overconfidence has positive impact on Risk taking behavior.
Cognitive ability and Risk taking

Dohamen, falk, Huffmen and Sundee (2007) did a research where they collected the data from
1000 adults from Germany. They found that a person with high cognitive ability would be
willing to take more risk. According to different studies we conclude that:
H4: Cognitive ability has positive impact on risk taking behavior.
Education and Risk taking

Education produces a greater risk tolerance level during investments (Sung & Hanna, 1996).
Levels of education and risk tolerance have a significant association between them. (Graham,
et al., 2009). There is a strong link between education and participation in financial markets
(Lewin, & Weber, 1969). A survey was conducted in the United States in 2010 of Consumer
Finances. The findings of that survey shows that 37.1% of households led by college
graduates participated in the stock market, as compared to the households that are led by
college dropouts where percentage of participation in the stock market was only 5.6%. This
survey clearly shows that education has an impact on investment. Financial decision-making
frequently includes an understanding of complex issues that may bound the ability of less-
educated people to make smart investment decisions (Black, Devereux, Lundborg & Majlesi,
2015), Jain and Mandat did a research in 2012 in India where they took a sample size of 200
individuals of different cities of Rajasthan found that there is a negative impact of education
on risk taking behavior. According to different studies we conclude that:
H5: Education has negative impact on risk taking behavior.
Age and Risk taking

Mature people abide by greater uncertainty as compared to the young investors, Grable and
Lytton, (1999). Older people achieve enough awareness and understanding, and make
improved speculation choices Kumar, and Korniotis, (2011).Investment performance of
individual investors depends upon their age. Researcher found that risk aversion
comparatively reduced as the people get older, if other variable are kept constant (Wang &
Hanna, 1997). Jain and Mandot in India said that the age has negative impact on risk taking
behavior they found their result by collecting data from 200 different individual in Rajasthan.
Pak and Mahmood did a research in 2013 with the sample size of 127 students in Kazakhstan
and they found the negative impact of age on Risk taking behavior. According to different
studies we conclude that:
H6: Age has negative impact on risk taking behavior.
Framework

FIGURE 1. FRAMEWORK

Methods

Sample size and data collection procedures

This study is based on collection of primary data pertaining to discovering the effect of
personality traits on investors’ level of risk taking during speculative decision. For this
purpose, we had used in-field study and cross sectional analysis. Survey data was collected
from numerous respondents through a structured questionnaire that were distributed at
different organizations in Islamabad and Lahore. The questionnaire consists of close-ended
questions in which risk taking behavior was considered as dependent variable to personality
traits individually as an independent variables while the study objectives selected for this
study were based on literature review. Only those persons were recruited who were concerned
in investments in Pakistan by using our personal and professional contacts. We distributed
175 questionnaires out of which 152 were found valid respondents on the basis of their
association with different investments companies in Pakistan. The sample covered both
genders, from different occupations and income levels; divided into several age groups and
education levels. We did not need to translate our English questionnaire into local language as
English is the medium of instruction at investment level and investors understand the English
language. The questionnaire consisted of 35 questions with a cover letter and we guaranteed
our respondents that the all information provided by them will be kept confidential. In
addition to 35 main questions, respondents were asked for their gender, age, education,
designation and organization. Keeping in mind the end goal to precisely check the outcomes,
different relationship tests were applied. These tests are likewise utilized by Jain and Mandot
in 2012 for almost similar study in Rajasthan India. In order to analyze the data, statistical
package SPSS was used. The factual conclusions consequently drawn have been trailed by
consistent translation.
The questionnaire was accurately filled by 152 respondents out of 175, in which majority of
respondents were male (73%) with the average age of 30 years. 50% of them were under
graduates, 43.3% were Masters while 3.3% were intermediate, 2.6% were PhDs and 0.7%
were CA qualifies.
Measures
The questionnaire comprised of 4 parts including neuroticism and extrovert, overconfidence
cognitive ability and risk taking behavior. The following questions were asked from
respondents based on Likert-scale
Neuroticism and extrovert
The first part comprised 12 questions and measured the two personality traits mentioned in the
BFI personality model. A total of 12 questions were selected from previous studies conducted
by Mayfield, Perdue, & Wooten, (2008) and Ashton, & Lee, (2005) to measure the BFF
personality dimensions. Among the 12 questions, 6 were used to measure neuroticism, and 6
were used to measure extroverts. We used a five-point Likert scale with anchors ranging from
1 = ‗strongly disagree‘, 2 = ‗Disagree‘, 3 = ‗Neutral‘, 4 = ‗Agree‘, to 5 = ‗strongly agree‘.
Here 5 meant the highest and 1 meant the lowest score in respective personality traits. Sample
questions included, for the extrovert, “I see myself as someone who is outgoing, sociable” and
for neuroticism, “I see myself as someone who stays calm in tense situations”.
Cognitive ability
The second part comprise of 10 questions to measure the cognitive ability of our respondents.
These questions were selected from a previous study done by Cacioppo, Petty and Kao in
1984 and used 5-point Likert-scale in which selection of 1= “strongly disagree” finished to 5=
“strongly agree”. Some sample questions are “I prefer complex to simple problems.”, “I like
tasks that require little thought once I’ve learned them.” and “Learning new ways to think
does not excite me very much.”
Risk taking behavior
The third part had six questions and attempted to estimate the individual’s risk-taking
behavior.. These questions were selected from a study by Wood and Zaichkowsky (2004).
We used a five-point Likert scale with anchors ranging from 1 = ‗strongly disagree‘, 2 =
‗Disagree‘, 3 = ‗Neutral‘, 4 = ‗Agree‘, to 5 = ‗strongly agree‘. Here 5 meant the highest and
1 meant the lowest score in respective personality traits. Sample questions included, “I avoid
risk when investing” and “I do not like to take financial risk”.
Overconfidence
The last and fourth part used seven questions to measure overconfidence toward investment
decisions. These questions were selected from previous studies by Wood and Zaichkowsky
(2004). The response were recorded through 5-point Likert-scale in which selection of 1=
“strongly disagree” while 5= “strongly agree”. Some questions included for overconfidence
are; “I am an experienced investor.” and “I feel more confident in my own investment opinion
over opinion of financial analysts and advisors.”

Results

We tested the hypotheses for the effects of education, age, neuroticism, extrovert,
overconfidence and cognitive ability on risk taking behavior of investors
Table 1 shows the mean, standard deviation, correlation and reliability of all the variables.
The correlation shows that all the constructs are having the strong relationship with the Risk
Taking Behavior (Dependent variable) except age and education. The highest impact on Risk
Taking Behavior is of Over Confidence with the value of .691 with the significance level of
.001 while Cognitive Ability has the second major impact with the value of .618 with the
significance level of .001 while the impact of Neuroticism and Extrovert is .396 and .268 with
the significance level of .001 simultaneously. All the significant values of above mentioned
variables are below 0.01 which shows that relationship amongst the variables exists. Age and
education have minor impact on risk taking behavior but the significance level is more than
0.1, which shows we have less confidence level on these constructs. The reliability of the
constructs shows that the extent to which variables upon test and retest give the same results.
These statistics must remain above 0.7. All the constructs used in the study fulfill the
minimum threshold level.
 Mean S.D 1 2 3 4 5 6 7
1 Education 2.4737 .64023 -
2 Age 30.3947 9.66194 .071 -
3 Extrovert 3.0482 .96739 .050 -.156 (0.88)
4 Neuroticism 2.2785 .67265 .058 -.099 .720** (0.78)
5 Cognitive Ability 2.0086 .52297 .004 .014 .200 *
.410** (0.83)

6 Overconfidence 1.8202 .40803 -.056 -.061 .229** .330** .472** (0.79)

7 Risk Taking Behavior 1.9615 .49894 .001 .016 .268 **

.396 **
.618 **
.691** (0.78)
Note. N=152; Cronbach's alphas presented in parenthesis.
**. Correlation is significant at the 0.01 level.
*. Correlation is significant at the 0.05 level.

TABLE 1. MEANS, STANDARD DEVIATIONS, CORRELATIONS, AND RELIABILITES

Linear regression analysis was used to test all the main effect hypotheses. Table 2 represents
the regression results for the effect of education, age, neuroticism, extrovert, overconfidence
and cognitive ability on risk taking behavior of investors. The results revealed that
neuroticism (β = .0.40, p < .001; ΔR2 = .016, p < .001), extrovert (β = .27, p < .001; ΔR2 =
.066, p < .001), overconfidence (β = .69, p < .001; ΔR2 = .047, p < .001) and cognitive ability
(β = .62, p < .001; ΔR2 = .037, p < .001) were positively related to risk taking behavior. These
results extract that H2, H3 and H4 are accepted. On the other hand, H1 was rejected. The
significance level of age and education was more than 0.1 thus H5 and H6 were also rejected.
Thus it clearly shows that Risk Taking Behavior was significant with Cognitive ability , over
confidence, neuroticism and extrovert.
Risk Taking Behavior
Regression Table ΔR2
β
Gender -.455 .207**
Extrovert 0.629** .392**
Openness to Experience .523** ..269**

Note. N=142; Standardized Coefficients are reported.

**. Correlation is significant at the 0.01 level.
*. Correlation is significant at the 0.05 level.

TABLE 2. REGRESSION RESULTS FOR GENDER, EXTROVERT, OPENNESS TO EXPERIENCE AND ONLINE BUYING BEHAVIOR

Discussion

The current study investigated the influence of personality traits including education, age,
neuroticism, extrovert, overconfidence and cognitive ability on risk-taking behavior. Male and
female participants did not significantly differ in age. The analysis gives a good fit and was
representative for the whole sample. This research accomplishes that there is a link between
personality traits, age, and education and investors’ risk taking behavior. Results show that
personality traits factors like extrovert, overconfidence, neuroticism and cognitive ability were
directly associated with risk-taking behavior while investor’s age, academic qualification have
moderate effect on the behavior of investors. There is very little positive correlation between
investor’s age and academic qualification but significance level was too high with their level
of risk taking behavior during the choice of investments.
Our findings clearly support that those individuals who are extrovert are more risk taker as
compared to those who are not extroverts because extroverts are friendly in nature and follow
other advice which helps them in taking more risk while following other thoughts and actions.
Similarly, those individuals who have more neuroticism in their personality are more risk
taker as compared to those who have less neuroticism. We examine from literature review
that neuroticism have negative relationship with risk taking behavior but the results are
against this hypothesis and show the positive relationship among the two in Pakistan due to its
unique culture. The results also reveal that neuroticism doesn’t play the same role in all over
the world and just because of the different culture in Pakistan and the behavior here of the
individuals, our this hypothesis got rejected.
The results also depicts that those individuals who are over confident in their nature are more
risk taker as compared to those people who are less confident. Overconfident people are sure
about their investment decision and assure that they are investing in the right direction and
feel more confident while investing as compared to taking advice from their friends and
colleagues. They think that they can easily beat the market by taking good decisions through
investments and can earn abnormal profits.
The findings also portray that the individuals who have more cognitive ability in their
personality are willing to take more risk as compared to those who have less cognition trait in
their personality. Thus, it clearly shows that our hypothesis got accepted. This demonstrates
that individuals with high cognition level calculate the risk first and then they become sure
about their investment because they have enough information before investing that why they
take more risk because they know the level of risk they take and how to deal with the risk.
This study encapsulates the examination of investor’s risk taking behavior in developing
countries. We particularly focused on individual personality traits. The study could have few
implications for governments, policymakers and the financial industry. As governments of
Pakistan are moving to capitalism and trying to develop capital markets, they could use the
study findings to improve financial literacy programs. The findings will help to select and
train the appropriate candidates for those programs. The results of this study imply that
Investment advisors should think about the personality traits and individual risk behavior
before giving advice to other about relevant financial services in an efficient manner. The
study, however, has several limitations. First, it was conducted only in one particular country,
i.e. Pakistan. The generalization of the findings needs to be considered carefully. Second, we
took sample size of 152 and it may not fully represent all potential investor groups in
Pakistan. Third, it looked only at 2 personality traits of big five model, while other 3 could
also have influence on investment decisions. Other personal factors, such as family
background, financial conditions and individual life experiences, could also have significant
influence on individuals’ investment decisions. Fourth, our study overlooked social and
cultural-level factors that could have some impact on investors’ decision. Despite these
limitations, the study provides valuable insight in understanding the relationships between
personality traits and investment decisions in context of a moving economy.

References

Ardichvili, A., 2001. Leadership styles and work‐related values of managers and employees of

manufacturing enterprises in post‐communist countries. Human Resource Development

Quarterly, 12(4), pp.363-383.
Arnett, J.J., 2000. Emerging adulthood: A theory of development from the late teens through the
twenties. American psychologist, 55(5), p.469.
Ashton, M.C. and Lee, K., 2005. Honesty‐Humility, the Big Five, and the Five‐Factor Model. Journal of
personality, 73(5), pp.1321-1354.
Bali, T.G., Demirtas, K.O., Levy, H. and Wolf, A., 2009. Bonds versus stocks: Investors’ age and risk
taking. Journal of Monetary Economics, 56(6), pp.817-830.
Basu, S., 1977. Investment performance of common stocks in relation to their price‐earnings ratios: A
test of the efficient market hypothesis. The journal of Finance, 32(3), pp.663-682.
Boyer, T.W., 2006. The development of risk-taking: A multi-perspective review. Developmental
review, 26(3), pp.291-345.
Busato, V.V., Prins, F.J., Elshout, J.J. and Hamaker, C., 2000. Intellectual ability, learning style,
personality, achievement motivation and academic success of psychology students in higher
education. Personality and Individual differences, 29(6), pp.1057-1068.
Carroll, J.C., Rideout, A.L., Wilson, B.J., Allanson, J.M., Blaine, S.M., Esplen, M.J., Farrell, S.A.,
Graham, G.E., MacKenzie, J., Meschino, W. and Miller, F., 2009. Genetic education for primary care
providers Improving attitudes, knowledge, and confidence. Canadian Family Physician, 55(12),
pp.e92-e99.
Chang, C.H., 2008. THE IMPACT OF BEHAVIORAL PITFALLS ON INVESTORS'DECISIONS: THE
DISPOSITION EFFECT IN THE TAIWANESE WARRANT MARKET. Social Behavior and Personality:
an international journal, 36(5), pp.617-634.
Chitra, K. and Sreedevi, V.R., 2011. Does personality traits influence the choice of investment?. IUP
Journal of Behavioral Finance, 8(2), p.47.
Eckel, C., Johnson, C. and Montmarquette, C., 2005. Saving decisions of the working poor: Short-and
long-term horizons. Research in experimental economics, 10, pp.219-260.
Ergeneli, A., Gohar, R. and Temirbekova, Z., 2007. Transformational leadership: Its relationship to
culture value dimensions. International Journal of Intercultural Relations, 31(6), pp.703-724.
Ernst, M., Pine, D.S. and Hardin, M., 2006. Triadic model of the neurobiology of motivated behavior in
adolescence. Psychological medicine, 36(03), pp.299-312.
Fama, E.F., 1965. The behavior of stock-market prices. The journal of Business, 38(1), pp.34-105.
Gardner, M. and Steinberg, L., 2005. Peer influence on risk taking, risk preference, and risky decision
making in adolescence and adulthood: an experimental study. Developmental psychology, 41(4),
p.625.
Grable, J. and Lytton, R.H., 1999. Financial risk tolerance revisited: the development of a risk
assessment instrument☆. Financial services review, 8(3), pp.163-181.
Guiso, L. and Paiella, M., 2005. The role of risk aversion in predicting individual behavior, Temi di
discussione (Economic working papers) 546, Bank of Italy. Economic Research Department.
Hallahan, T., Faff, R. and McKenzie, M., 2003. An exploratory investigation of the relation between risk
tolerance scores and demographic characteristics. Journal of Multinational Financial
Management, 13(4), pp.483-502.
Heckman, J.J., Stixrud, J. and Urzua, S., 2006. The effects of cognitive and noncognitive abilities on
labor market outcomes and social behavior (No. w12006). National Bureau of Economic Research.
Jagongo, A.O. and Mutswenje, V.S., 2014. A survey of the factors influencing investment decisions:
the case of individual investors at the NSE.
Kahneman, D. and Tversky, A., 1979. Prospect theory: An analysis of decision under
risk. Econometrica: Journal of the econometric society, pp.263-291.
Kalantari, B., 2010. Herbert A. Simon on making decisions: enduring insights and bounded
rationality. Journal of management History, 16(4), pp.509-520.
Kalra Sahi, S., 2012. Neurofinance and investment behaviour. Studies in Economics and
Finance, 29(4), pp.246-267.
Kalyuzhnova, Y. and Kambhampati, U., 2008. The determinants of individual happiness in
Kazakhstan. Economic Systems, 32(3), pp.285-299.
Korniotis, G.M. and Kumar, A., 2011. Do older investors make better investment decisions?. The
Review of Economics and Statistics, 93(1), pp.244-265.
Kourtidis, D., Šević, Ž. and Chatzoglou, P., 2011. Investors’ trading activity: A behavioural perspective
and empirical results. The Journal of Socio-Economics, 40(5), pp.548-557.
Lerner, J.S. and Keltner, D., 2001. Fear, anger, and risk. Journal of personality and social
psychology, 81(1), p.146.
Lewin, A.Y. and Weber, W.L., 1969. Management game teams in education and organization
research: An experiment on risk taking. Academy of Management Journal, 12(1), pp.49-58.
Lewin, A.Y. and Weber, W.L., 1969. Management game teams in education and organization
research: An experiment on risk taking. Academy of Management Journal, 12(1), pp.49-58.
Malkiel, B.G. and Fama, E.F., 1970. Efficient capital markets: A review of theory and empirical
work. The journal of Finance, 25(2), pp.383-417.
Markowitz, H., 1952. Portfolio selection. The journal of finance, 7(1), pp.77-91.
Maxfield, S., Shapiro, M., Gupta, V. and Hass, S., 2010. Gender and risk: women, risk taking and risk
aversion. Gender in Management: An International Journal, 25(7), pp.586-604.
Mayfield, C., Perdue, G. and Wooten, K., 2008. Investment management and personality
type. Financial Services Review, 17(3), p.219.
Mishra, S., Lalumière, M.L. and Williams, R.J., 2010. Gambling as a form of risk-taking: Individual
differences in personality, risk-accepting attitudes, and behavioral preferences for risk. Personality and
Individual Differences, 49(6), pp.616-621.
Muhammad, N.M.N. and Abdullah, M., 2009. Investment decision-making style: Are Malaysian
investors rational decision makers. Interdisciplinary Journal of Contemporary Research in
Business, 1(3), pp.96-108.
Nicholson, N., Soane, E., Fenton‐O'Creevy, M. and Willman, P., 2005. Personality and

domain‐specific risk taking. Journal of Risk Research, 8(2), pp.157-176.

O’Connor, M.C. and Paunonen, S.V., 2007. Big Five personality predictors of post-secondary
academic performance. Personality and Individual differences, 43(5), pp.971-990.
Özmen, O. and Sümer, Z.H., 2011. Predictors of risk-taking behaviors among Turkish adolescents.
Personality and Individual Differences, 50(1), pp.4-9.
Pak, O. and Mahmood, M., 2015. Impact of personality on risk tolerance and investment decisions: A
study on potential investors of Kazakhstan. International Journal of Commerce and
Management, 25(4), pp.370-384.
Petty, R.E., Cacioppo, J.T. and Kao, C.F., 1984. The efficient assessment of need for
cognition. Journal of Personality Assessment, 48(3), pp.306-307.
Ross, S.A, Westerfield, R.W., & Jaffe, J. (2010). Corporate Finance. McGraw Hill International Edition.
Sadi, R., Asl, H.G., Rostami, M.R., Gholipour, A. and Gholipour, F., 2011. Behavioral finance: The
explanation of investors' personality and perceptual biases effects on financial decisions. International
journal of economics and finance, 3(5), p.234.
Semykina, A. and Linz, S.J., 2010. Analyzing the gender pay gap in transition economies: How much
does personality matter?. Human Relations.
Shiller, R.J., 2003. From efficient markets theory to behavioral finance. The Journal of Economic
Perspectives, 17(1), pp.83-104.
Steinberg, L., 2005. Cognitive and affective development in adolescence. Trends in cognitive
sciences, 9(2), pp.69-74.
Steinberg, L., 2008. A social neuroscience perspective on adolescent risk-taking. Developmental
review, 28(1), pp.78-106.
Steinberg, L., 2010. A dual systems model of adolescent risk‐taking. Developmental
psychobiology, 52(3), pp.216-224.
Thaler, R., 1980. Toward a positive theory of consumer choice. Journal of Economic Behavior &
Organization, 1(1), pp.39-60.
Weller, J.A. and Thulin, E.W., 2012. Do honest people take fewer risks? Personality correlates of risk-
taking to achieve gains and avoid losses in HEXACO space. Personality and individual
differences, 53(7), pp.923-926.
Wood, R. and Zaichkowsky, J.L., 2004. Attitudes and trading behavior of stock market investors: A
segmentation approach. The Journal of Behavioral Finance, 5(3), pp.170-179.
Young, S., Gudjonsson, G.H., Carter, P., Terry, R. and Morris, R., 2012. Simulation of risk-taking and it
relationship with personality. Personality and Individual Differences, 53(3), pp.294-299.
Zuckerman, M. and Kuhlman, D.M., 2000. Personality and risk‐taking: common bisocial
factors. Journal of personality, 68(6), pp.999-1029.
Zuckerman, M., 1994. Behavioral expressions and biosocial bases of sensation seeking. Cambridge
university press