Role of Optimism Bias and Risk Attitude on Investment Behaviour

Abstract

Purpose: The study undertakes to identify individual characteristics and their investment pattern. The individual characteristics include MBTI personality scores, risk taking behaviour, biases and investor demographics. Data and Methodology: A structured questionnaire was administered on 117 respondents in India. The questions were related to demographic variables, optimism bias, investment pattern and MBTI (Myers-Briggs Type Indicator®) personality assessment. The results were analysed using chi-square and ANOVA. Findings: The results show that presence of optimism bias in investors is influenced by marital status, nature of employment and work experience of investors. The Indian investors are majorly balanced or conservative out of the total sample in terms of risk taking behaviour. Risk taking attitude is affected by personality of individuals. Investment in high risk instruments is different among males and females, various age groups, marital status, and work place activity. Investment in medium risk instruments significantly differ for work experience on gender basis. Investment in low risk instruments does not differ for demographic variables of investors as all investors invest equally in safe investment mode. MBTI personality type is a less significant variable which directly affects investment patterns of Indian investors. The study can be useful for portfolio managers, investment advisors who can use it for designing investment portfolios and products for their clients based on their demographic, and behavioural profiling. Originality: This study identifies relationship between investment pattern, behavioural biases and demographic characteristics of Indian investors. MBTI personality assessment is one new dimension which is less researched in studying investment behaviour in Indian context.