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RISK AVERSION AND PERSONALITY TYPE

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by

hale ergın

on 13 June 2016

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Transcript of RISK AVERSION AND PERSONALITY TYPE

Logo
Aim of this study

The relationship between personality type dimensions of they Myers-Briggs Type Indicator (MBTI) and the moments approach to individual investor risk tolerance inherent in expected theory (EUT).
Two major perspectives
1) The analysis and understanding of individual choice
2) The more recent and behaviorally oriented prospect theory
investor aversion
investor confusion
RISK AVERSION AND PERSONALITY TYPE
Riley
and Chow [1992]
Factors such as
age, education, income, wealth, and marital status play an important role in distinguishing
risk tolerance among individuals
investor preferences for cash dividens
This literature establishes the bedrock of behavioral finance and contributes to our understanding of decision making.
Find a positive relationship between risk tolerance and individual demographics
There are five type of investors :

1) adventurers
2) celebrities
3) guardians
4) individualists
5) straight arrows
This is based on two personality categories:
1) careful versus impetuous
2) anxious versus confident
MBTI (MYERS-BRIGGS TYPE INDICATOR):
individual personality preference instrument
measures : -extraversion vs introversion -sensing vs intuition-thinking
vs feeling-judging vs perception
68college students
various level of investment experience
consist of ninety-three questions
Methods
individuals tend to act normal rather than rational
Conclusion :
higher levels of risk tolerance are related to MBTI preferences
contrary to our hypothesis, we find that individuals with a preference for judging (J) tended to be able to tolerate much more variance than those with a preference for perceiving (P)
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