Impact of personal economic environment and personality factors on individual financial decision making

Abstract

This study on healthy young male students aimed to enlighten the associations between an individual’s financial decision making and surrogate makers for environmental factors covering long-term financial socialization, the current financial security/responsibility, and the personal affinity to financial affairs as represented by parental income, funding situation, and field of study. A group of 150 male young healthy students underwent two versions of the Holt and Laury (2002) lottery paradigm (matrix and random sequential version). Their financial decision was mainly driven by the factor “source of funding”: students with strict performance control (grants, scholarships) had much higher rates of relative risk aversion (RRA) than subjects with support from family (ΔRRA = 0.22; p = 0.018). Personality scores only modestly affected the outcome. In an ANOVA, however, also the intelligence quotient significantly and relevantly contributed to the explanation of variance; the effects of parental income and the personality factors “agreeableness” and “openness” showed moderate to modest – but significant – effects. These findings suggest that environmental factors more than personality factors affect risk aversion.

Impact of Personality Traits and Demographic Factors on Risk Attitude

“…Based on a comparison of results, it is not possible to provide a general answer about the role of cultural influences on the personality traits-risk attitude nexus. At the same time, we cannot agree with the conclusion formulated by Prinz et al (2014) about the greater significance of environmental factors in comparison to personality factors in affecting risk aversion. According to our results and their comparison, it seems that the positive relation between extraversion and risk seeking is quite stable across various cultures.…”

Individual Differences in Risk-Taking Preference of Undergraduate Students

“…Among the Big Five INDIVIDUAL DIFFERENCES IN RISK-TAKING PREFERENCE OF UNDERGRADUATE STUDENTS traits, higher risk-taking preference was associated with higher extraversion and openness and lower neuroticism as expected. These findings are in line with previous studies reporting associations with risk-taking preference, risk tolerance and investment decisions (Hitay & Anbar, 2020;Josef et al, 2016;Koyluoglu et al, 2019;Nicholson et al, 2005;Oehler et al, 2018;Pan & Statman, 2013;Pinjisakikool, 2017) but conflict with others (Filbeck et al, 2005;Prinz et al, 2014). Extraversion and neuroticism showed stronger correlations with risk-taking in men and women, respectively.…”

“…Extraversion and neuroticism showed stronger correlations with risk-taking in men and women, respectively. Agreeableness was weakly but positively associated with risk-taking, driven mostly by men, a finding opposed to our hypothesis but in line with other studies, that suggest its relevance to thrill seeking behavior in early age (Koyluoglu et al, 2019;Prinz et al, 2014). On the other hand, higher conscientiousness was associated with lower risk-taking in women but not in men (Baffour et al, 2018).…”

Stability and change in risk-taking propensity across the adult life span.

“…In line with these efforts, various studies have investigated the relation between risk taking and the Big Five personality factors. Although the results are mixed, there is some evidence that individual differences in personality may be related to risk-taking behavior: Risk taking has been found to be positively associated with Openness to Experience, Extraversion, and Sensation Seeking; and negatively associated with Agreeableness and Neuroticism (Becker, Deckers, Dohmen, Falk, & Kosse, 2012; Deck, Lee, Reyes, & Rosen, 2012; Mishra & Lalumière, 2011; Nicholson et al, 2005; Prinz, Gründer, Hilgers, Holtemöller, & Vernaleken, 2014). There are also some findings linking personality variables to performance on behavioral measures of risk taking, such as the Iowa Gambling or the Balloon Analogue Risk Task.…”