Personality Traits and Investment Behaviour

In this thesis I construct a unique dataset to test the role of individual characteristics in affecting the investor behaviour. In particular, I present two empirical research papers that investigate trading patterns unlikely to be driven by rational models, and a literature review in which are summarized the main findings within the new field of “personality finance”. Using an experimental analysis that combine a trading simulation with a Big-Five personality questionnaire, Paper 1 and Paper 2 illustrate how personality affects the individual level of disposition effect and trading volume respectively. In detail, among a sample of 230 students, in the first paper I find strong heterogeneity in the level of disposition effect recorded. In explaining these differences and controlling for demographic variables, I show that the trait of extroversion is positively related with tendency to sell stocks at gain rather than at loss, while subjects with high conscientiousness and openness to experience are less biased. In a different sample of 176 students, from Paper 2, I demonstrate that emotionally stable investors are more likely to exhibit higher trading volume, while high-conscientiousness seems to weaker it. Demographics and risk-attitude measures moderate the individual in- vestment choices. Finally, in the third paper I introduce a literature review on those works in which the personality of the investors is used to explain subjects trading performance and specific financial phenomena. I try to organize the main findings from this new field, named “personality finance”, identifying the psychological sources that can predict the heterogeneity in the individual investment behaviour.