Personality traits and risk tolerance among young investors

Abstract

India is a developing nation with highest number of youths in world. The youth is growing in the era of internet, least fare Wi-Fi connections. They have ample of knowledge available at one click. For any decision they search multiple options which give them sense that they are opting for the best and will reduce the chances of setbacks. Although every individual vary in their risk taking capacity and the capacity to tolerate setbacks is mostly related to kind of personality characteristics an individual carry. Present study is an attempt to identify the kind of relationship between personality types in (BIG Five model) and risk tolerance among youth. There are five personality traits measured through BIG Five namely; Extraversion, Agreeableness, Conscientiousness, Neuroticism (Emotional Instability) and Openness to Experience. The study intended to ask whether these personality types play an important role in deciding tolerance behavior among young investors. The data was collected on a five point scale for all five personality traits. Each trait was evaluated through five statements on a scale developed by Mayfield, Perdue & Wooten (2008) modified by Wong, Chuah, Kui, Soo & Ang (2016). There were 25 statements in totality for measuring personality traits. The data was collected for risk tolerance, inclusive of eight items developed by Grable and Lytton (1999). There were 102 respondents from whom data was collected. The sampling respondents were in the age range of 22 to 27 years, who either have just started earning or having less than 5 years of total earning tenure. These investors are considered a bit selective but high in risk tolerance. We also intend to find out the kind of relationship between variables. Results indicated that Agreeableness, Neuroticism and Openness were strongly correlated to risk tolerance, but there was no significant relationship of extraversion and conscientiousness with risk tolerance. Furthermore, risk tolerance was checked on the basis of gender. The results indicated that there was no difference in risk tolerance of male and female investors unlikely suggested by Mishra, Lalumiere & William (2011) who stated that risk propensity varies from male to female.