The relevance of anger, anxiety, gender and race in investment decisions

Abstract

This study investigates the relative importance of trait anger and trait anxiety in financial decision-making. Given the disparate economic, cultural and social environments within an emerging market, this study focuses on South Africa to provide unique insights. The use of a student experimental cohort and hypothetical scenarios allows for the assessment of prima facie evidence of the merits of future research using more experienced participants and more realistic scenarios. Gender and race are incorporated as explanatory variables given the history of South Africa and the disparate opportunities amongst individuals of different races. Both variables are also notable indicators of financial behaviour and decision-making. A questionnaire was completed by 288 university students which measured Trait anxiety and Trait anger using the Anxiety Inventory and Anger Expression Inventory-2. Using multinomial logistic regressions, the results showed that White participants (rather than Black, Indian or mixed-race participants) and those individuals with higher levels of anger are more inclined to invest in equity. Alternatively, Women and individuals with higher levels of anxiety were found to be more risk averse. These findings are relevant to financial advisers as most of the predictive outcomes relate to risk which is vital in making investment decisions. While prior research has shown the relevance of personality traits on investment performance, the added dimension of gender and race adds practicality to the findings. It also highlights the necessity of including demographic variables when assessing personality traits.