The Effect of Personality Characteristics, Pessimism, and Procrastination towards Investment Decisions

Dhimas Aditya Zulhajmi; Abdur Rafik

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12 August 2022

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15 August 2022

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Abstract

This study explores the effect of personality traits and behavioral constraints of students on their decision to invest in the stock and cryptocurrency markets. Personality traits are measured using Norman's personality traits which are neuroticism, extraversion, conscientiousness, openness to experience, and agreeableness, while behavioral constraints are measured using pessimism and procrastination. An online questionnaire is administered to active students; in total, 212 final samples are collected. The data is analyzed using PLS-Structural Equation Modelling (SEM), in which the reflective measurement is applied. This study found that extraversion positively influences the students' probability of investing in the stock market as their risk tolerance moderates it. At the same time, a similar result also found that risk tolerance positively affects openness to experience personality regarding the cryptocurrency acquisition.

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big five personality pessimism procrastination investment decision

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Zulhajmi, D. A., & Rafik, A. (2022). The Effect of Personality Characteristics, Pessimism, and Procrastination towards Investment Decisions. Selekta Manajemen: Jurnal Mahasiswa Bisnis & Manajemen, 1(3), 113–140. Retrieved from https://journal.uii.ac.id/selma/article/view/25114

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References

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References

Abood, N. (2019). Big five traits: A critical review. Gadjah Mada International Journal of Business, 21(2), pp. 159–186. https://doi.org/10.22146/gamaijb.34931

Ahmad, F. (2020). Personality traits as predictor of cognitive biases: moderating role of risk-attitude. Qualitative Research in Financial Markets, 12(4), pp. 465–484. https://doi.org/10.1108/QRFM-10-2019-0123

Akhtar, F., & Das, N. (2020). Investor personality and investment performance: from the perspective of psychological traits. Qualitative Research in Financial Markets, 12(3), pp. 333–352. https://doi.org/10.1108/QRFM-11-2018-0116

Akhtar, F., Thyagaraj, K. S., & Das, N. (2018). Perceived Investment Performance of Individual Investors is Related to the Big-Five and the General Factor of Personality (GPF). Global Business Review, 19(2), pp. 342–356. https://doi.org/10.1177/0972150917713527

Alexandre, F., Bação, P., & Portela, M. (2020). Is the basic life-cycle theory of consumption becoming more relevant? Evidence from Portugal. Review of Economics of the Household, 18(1), pp. 93–116. https://doi.org/10.1007/s11150-019-09471-0

Aren, S., & Aydemir, S. D. (2015). The Factors Influencing Given Investment Choices of Individuals. Procedia - Social and Behavioral Sciences, 210, pp. 126–135. https://doi.org/10.1016/j.sbspro.2015.11.351

Aspembitova, A. T., Feng, L., & Chew, L. Y. (2021). Behavioral structure of users in cryptocurrency market. PLoS ONE, 16(1 January), pp. 1–19. https://doi.org/10.1371/journal.pone.0242600

Baker, H. K., & Ricciardi, V. (2014). How Biases Affect Investor Behaviour. The European Financial Review, pp. 7–10.

Banerjee, A., & Chaudhury, S. (2010). Statistics without tears: Populations and samples. Industrial Psychiatry Journal, 19(1), pp. 60-65. https://doi.org/10.4103/0972-6748.77642

Becchetti, L., Caiazza, S., & Coviello, D. (2012). Financial Education and Investment Attitudes in High Schools: Evidence from a Randomized Experiment. SSRN Electronic Journal, 9(10). https://doi.org/10.2139/ssrn.1923626

Benmansour, S., Jouini, E., Napp, C., Marin, J., & Robert, C. (2007). Are risk averse agents more optimistic ? A Bayesian estimation approach. Journal of Applied Econometrics, 23, pp.843-860.

Binda, J. (2020). Cryptocurrencies – problems of the high-risk instrument definition. Investment Management and Financial Innovations, 17(1), pp. 227–241. https://doi.org/10.21511/imfi.17(1).2020.20

Blanton, H., Axsom, D., McClive, K. P., & Price, S. (2001). Pessimistic bias in comparative evaluations: A case of perceived vulnerability to the effects of negative life events. Personality and Social Psychology Bulletin, 27(12), pp. 1627–1636. https://doi.org/10.1177/01461672012712006

Borghans, L., Duckworth, A. L., Heckman, J. J., & ter Weel, B. (2008). The Economics and Psychology of Personality Traits. Journal of Human Resources, 43(4), pp. 972–1059. https://doi.org/10.1353/jhr.2008.0017

Caliendo, M., Fossen, F., & Kritikos, A. S. (2014). Personality characteristics and the decisions to become and stay self-employed. Small Business Economics, 42(4), pp. 787–814. https://doi.org/10.1007/s11187-013-9514-8

Chmelíková, B. (2017). Financial Decision-Making among Finance Students : An Empirical Study from the Czech Republic. 11(1), pp. 49–52.

Costa, P. T., & McCrae, R. R. (2008). The revised NEO personality inventory (NEO-PI-R). In The SAGE Handbook of Personality Theory and Assessment: Volume 2 - Personality Measurement and Testing (Issue January 2008). https://doi.org/10.4135/9781849200479.n9

Costa, P. T., & McCrae, R. R. (2013). The five-factor model of personality and its relevance to personality disorders. The Science of Mental Health: Volume 7: Personality and Personality Disorder, 6(March 1991), pp. 17–33.

De Bortoli, D., Da Costa, N., Goulart, M., & Campara, J. (2019). Personality traits and investor profile analysis: A behavioral finance study. PLoS ONE, 14(3), pp. 1–18. https://doi.org/10.1371/journal.pone.0214062

Deaton, A. S. (2011). Franco Modigliani and the Life Cycle Theory of Consumption. SSRN Electronic Journal, March. https://doi.org/10.2139/ssrn.686475

Durand, R. B., Fung, L., & Limkriangkrai, M. (2019). Myopic Loss Aversion, Personality, and Gender. Journal of Behavioral Finance, 20(3), pp. 339–353. https://doi.org/10.1080/15427560.2018.1511562

Durand, R. B., Newby, R., & Sanghani, J. (2008). An Intimate Portrait of the Individual Investor. Journal of Behavioral Finance, 9(4), pp. 193–208. https://doi.org/10.1080/15427560802341020

Durand, R., Newby, R., Tant, K., & Trepongkaruna, S. (2013). Overconfidence, overreaction and personality. In Review of Behavioral Finance (Vol. 5, Issue 2). https://doi.org/10.1108/RBF-07-2012-0011

Emerling, B. (2020). Seismic Shifts In The Cryptocurrency Market May Be Ahead, With Stablecoins Soaring. https://finance.yahoo.com/news/seismic-shifts-cryptocurrency-market-may-194512034.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAEoj-pZRTHsNJ8Ocf-GBqJCR6Dza-lwcXPY4UeFKbI55c6Y2E8rEZSl6Q8z82yb5UP80iqGzKyyQmhXrP09MU5x

Ferreira, S. J. (2019). Is Financial Risk Tolerance Influenced By Personality Traits? August, pp. 50–60. https://doi.org/10.20472/efc.2019.012.005

Fornell, C., & Larcker, D. F. (1981). Evaluating Structural Equation Models with Unobservable Variables and Measurement Error. Journal of Marketing Research, 18(1), pp. 39-50. https://doi.org/10.2307/3151312

Gambetti, E., & Giusberti, F. (2012). The effect of anger and anxiety traits on investment decisions. Journal of Economic Psychology, 33(6), pp. 1059–1069. https://doi.org/10.1016/j.joep.2012.07.001

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The Effect of Personality Characteristics, Pessimism, and Procrastination towards Investment Decisions

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