Personality Type and investment management

Abstract
We study numerous psychological experiences that how different personality traits differ
investment intentions in investments; in this research we focused on five personality types. The
main purpose of this research is to analyze that how personality traits risk taking ability is
differentiate in investment management from other personality traits, how these traits are taking
decision in investments. We have followed primary source of data using Likert Scale by doing
survey at SZABIST Larkana Campus. The research results shows that the impact of personality
traits and risk aversion have positive relationship on to the investment management. People’s
personality trait are different from others with this their investment pattern differentiates.
Keywords :Big Five Personality Traits; Risk Aversion; Behavioral Finance and Investment
Management.
Personality Type on Investment Management
1. Introduction
1.1 Background of the study
As you are seeing this era is in growth stage for that all the individuals, financial markets or
other type of investors doing investment in different financial assets and real assets for different
purpose. Our motive of this research to analyze how short term and long term investment among
SZABIST investors. According to the research done by [ CITATION Cli08 \l 1033 ], in which it has
stated that how different personality traits are considering the short term and long term
investments in which it has stated that extraversion persons are more focusing on short term
investments, Neuroticism are focusing on short term investment but more focusing risk averse as
compare to the Extraversion personality and Openness to Experience personalities in which they
are focusing on long term long term investment not focusing on the short term investments.
(P.T. Costa and R3.R. McCrae, 1992).give the major contribution of individual personality (Big
Five Model). According to the behavioral economists and classical school the individual do not
function perfectly. (Martin Weber 1999) do66ne the sub sequent interpretations individual
performance and market occurrences is related with behavioral finance which will help to
construct the knowledge from both spiritual and financial concept. (Fromlet 2001) Behavioral
Finance is used to identify the behavioral biases which is commonly presented by the investors
and also provides approaches to overcome the uncertain activities.

1.2 Significance of the Study

Different investors have different cognitive and emotional weaknesses which effects on
investment decision making. Many financial researchers have done researches over some years
that all have different concepts related to this topic that the investors did not make decision
rationally always, so that’s why behavioral finance is playing greater role towards the investors
to make healthy investment decision making. As you are seeing that different investors have
different behavioral biases which generate the systematic error in a way that they collect
information for investment decision making. Because of systematic character the errors can be
predictable and avoidable. Many financial researches are trying to evaluate the investors risk
taking capability and investment power in terms of financial assets.
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Personality is the essential for investment decision making, to understand that how the
personality traits of the investors is related to the decision and outcome it creates link of many
behavioral explanations use in finance. It plays important consequences for the investors and also
for us to understand the finance related activities; as we have possibly information that how
various, seemingly unrelated, phenomena are linked. The investors creates different type of
portfolios that will similar to the personality type and self-knowledge which will help us to
understand the type of decision they make and from that investment decision investors will get to
judge through investment behavior.
Personality is the combination of feelings and behaviors which will differentiate from one person
to another in the investment decision which is highly influenced by the certain factors like mood,
emotion and cognitive. Personality is the combination of these personality variables which help
us to differentiate one individual to other and with this individual investment decision making
objectives changes.
Investment management is the broader term in which there is asset management of different type
of financial instruments like: bonds, stock, shares, saving account in the Bank etc. and other type
of assets like real assets for example real estate to achieve certain specific investor’s goals. This
Research motive is to analyze that how the personality trait is influencing the investor’s
investment decision making.
In identifying Personality traits we have focused on the Big five personality traits in which we
have on five characteristics of personality trait that are openness to experience,
conscientiousness, extraversion, agreeableness and neuroticism which it helps to identify the
personality of the human according to his investment decision making.
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1.3 Scope of the Study
In this research we have focused on SZABIST investors not outside. This Research have several
limitations in which we have focused on personality trait of SZABIST investors not from outside
the SZABIST to analyze for investment purpose that can help to know that how an investor
invest according to their personality trait.
1.4 Justification of the Research
This research provides several benefits first, It will help to get know that which type of
personality trait are existing in SZABIST. Secondly, that it will also helpful for the financial
institution to get know about SZABIST students that which type of offering can beneficial to
offer the customers.
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1.5Theoretical Framework

Independent Dependent
Variable Variable

Personality trait Investment

Risk aversion Management
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1.6ResearchQuestions
 To what extent does personality type impact on investment management?
 To what extent does risk aversion impact on the investment management?

1.7 Research Objectives:

 To identify the relation of personality type to investment management?
 To identify the relation of risk aversion for investment management?

1.8 Research Hypothesis

 H0: There is a negative relationship among the personality type, risk aversion for
investment management.
 H1: There is a positive relationship among personality type and risk aversion for
investment management
 H2: There is positive relationship of personality type for investment management and
negative relation with risk aversion to investment management
 H3: There is negative relationship of personality type for investment management and
positive relation with risk aversion to investment management
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2. Literature Review:
This Research has several schools of thoughts according to the existing authors to get clear
insight of our Research topic. This Research Review is based on Risk aversion, Personality traits
and Investment management.
The word personality gives the sense of uniformity, internal destiny, and uniqueness. There are
different characteristics of an individual race of his life. Everyone have different experience and
different level of take stress in terms of stress or other activity but each of us are different from
others [ CITATION Car00 \l 1033 ].
Personality traits are changing according to the age wise and it shows positive results in
increasing of age and decrease negative constraint like: Neuroticism. It has considered age of 20-
60 with increase of age people become more consciousness, agreeableness and emotional
stability [CITATION ELI14 \l 1033 ].
[CITATION The11 \l 1033 ] in this research it also concludes that in bull and bearish market there is
not success because of trait. And he also Shows that openness to experiences personality has
mental flexibility and emotionally stable seems more successful traits for investors to make most
correlated investment decision. It’s not necessary that for becoming successful investor you
should have these traits. Personality traits differ through short term and long term investment,
There are six findings. First, demographic factors and personality types’ effects the investment
choice. Demographic factors such as gender, age, education, occupation and personality type
such as conventional and aggressive. Secondly, the increase of demographic factors is
investment choice will increase and with this increase the personality type also become arranged.
Thirdly, Investment choices also effected by family needs like: education, age, annual income,
gender which affects the yearly income, Like: Female are taking less risky investment that’s why
they go with fixed return as compare to the man’s prefer investment in risky assets like: in real
assets. Fourthly, age group of less than 25 years they are willing to take more risky investment if
it has age group of 60 years those are going to have they bank term deposits to have the secured
future. Fifthly, personalities vary the investment choices. Sixthly, it has also said that investment
decision is also affected by the economic conditions; it is affected by the price like stock price
and real assets price [ CITATION DrN10 \l 1033 ].
Investment variable and demographic variables showed the greater correlations in personality
factors. This research has focused on the retail investors in India in this they have find that with
the increase of the demographic factors it affects the personality when it is affected then it affects
investment choices in terms of risk and return of individual investors [ CITATION Cha14 \l 1033 ].
According to the [ CITATION Bar87 \l 1033 ] characterized the two types of personality one is the
active and other is passive which effects the investment decision Active partners do investment
to create capital for the future and passive partners do the investment for their future generations
like: children’s, family etc.
According to[ CITATION Ras11 \l 1033 ], conclude that according to the correlation it shows the
greater impact among the personality of investors and the intellectual mistakes in Tehran's stock
market has proved that personality plays greater part in analyzing the behavior of investors.
Firstly, the extraversion personality and perception have positive related so it shows to reduce
the risk errors in terms of investing in the stock market and support the individuals who will
become future investors to have good investment decisions. Secondly, give the output that
agreeableness personality have no positive response towards the perception.
Personality and nature effect individual investor decision making. It has focused on junior
investors and guardian investors, junior and guardian investors have somehow same investment
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behavior but guardian investors most focused on stock exchange in more risky investment.
Because of their same desire relay on financial literacy, insight and pattern of deciding the option
of people performance is become more. The people performance is because of investment
opportunities needs the financial literacy to make effective research. The personality which have
are have these type of characters introvert, sensation, feeling and judgment (ISFJ) that type of
investors are willing to buy the effective stocks and try to get growth in terms of price, return and
make better future decisions. Guardian decisions of buying and selling to financial assets is
affected by their other decisions. Stock Market provides all the literacy for attract the investors in
terms of buying and selling of the stock but depends upon the Guardian investor preferences
[ CITATION Mah13 \l 1033 ].
The nature of individuals has different preferences related to the risk and how to approach it. The
[ CITATION Von47 \l 1033 ] used expected utility approach which gives the foundation of the risk in
terms of economics and finance. The key concept of that theory to maximize the utility is core
aspect in decision making.
[ CITATION Mar52 \l 1033 ]Suggest two approaches in which investors has two needs first the
demand of higher returns and other is not demanding any type of risk involved in terms of
returns, secondly, which he accumulates the risk.
This School of thoughts has developed principal as researchers to properly examine and explain
the investor’s choices in terms of risk and return within investment. One principal depends upon
the demographic factors and other principal is the formulation of psychology, that how an
investors taking investment decisions with concern of the investment decisions. Among
demographic factors, several studies are conducted by different authors perceived that
demographics factors can clarify the investor behavior.
He says that in terms of risk aversion gender plays an important role[ CITATION Wor06 \l 1033 ].
Says that women are less involved in terms of risky investment and men also Posses the same
personal characteristics [ CITATION Har00 \l 1033 ].
Different investors have different preferences in terms of risk and return. Different researchers
have given different principals in choosing the investment, and when investors are going to
invest can they evaluate the risk with any exactness.
Finds that individual can access his risk aversion terms of investment shows the analysis between
demographic factors and financial risk aversion. While we find that peoples risk tolerance and
self-assessed is consider the disparity among the tendency of the respondents to be risk aversion.
This research finds that if you doing investment in subjective analysis then it can lead
inappropriate calculation of risk and the market clients’ needs the conservative knowledge and
investment strategies. Relationship with risk aversion and demographic factors was negative
because as age increases the demands and needs increases like: age, gender, marital status,
income and wealth are effecting investment risk aversion. [ CITATION Hal04 \l 1033 ].[ CITATION
Bai05 \l 1033 ], says that there is strong connection with risk taking and investor behavior for the
investment.
[ CITATION War96 \l 1033 ], claims that there is a wide relationship between the more investment
risk approach and the risks inherent in investor portfolios. This research was further implemented
by [ CITATION Kel06 \l 1033 ] , who finds that individual risk attitude in terms of finance shows
positive impact on willing to make more risky investment in stocks in constructing portfolio.
[ CITATION Mor98 \l 1033 ] , believes that it is difficult to judge the individual actual risk perceiving
which is associated with that investment they face, and that’s why it is so difficult to match the
desired level of risk level.
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3 Research Methodology
3.1 Research design
Many researchers has conducted different researches which are based on male and female
personality and risk aversion, we have applied the same technique to analyze the perception of
male and female personality traits according to their investment management. In which we will
use the Likert Scale to conclude this research.
3.2 Population
 It will include the age bracket of under 30 and over 50 years old.
 The students of SZABIST Larkana.
 The population is 100 students of SZABIST.
3.3 Sample and sampling method
 The random sampling technique is used to take the response of questionnaire
 Sample size is 100 students of SZABIST Larkana.
3.4 Measurement / Instrument selection
 The method in which we collect the data by primary data in form of questionnaire. The
questionnaire is divided into two sections. First section is demographic questions and other
section is variable questions.

3.5 Data analysis technique

 The data analysis technique for our research is SPSS (Statistical Package for Social Science)
which gives us accurate results for our whole research, and it will analyze the actual factors
contribute to success of entrepreneurial activities.
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4 DATA PRESENTATION AND ANALYSIS

The purpose of this chapter is to make a presentation of the data collected and analysis derivable
from the parameter of interest. To achieve this purpose, a questionnaire was drawn up and
administered on respondents who were student of SZABIST Larkana. The areas covered in the
questionnaire bother on the respondents‟ personality type and Risk which will impact on the
investment management. The analysis was done each individual parameter we have set out to
investigate using simple percentages.
The questionnaire comprises two sections labeled Section A and Section B. Section A pools
question on the personal data of the respondents to throw light on some demographic data of the
respondents while section B constitutes the technical questions of personality type, Risk. This
will impact on the investment Management.
Table 4.1 Reliability Statistics

N0 of Items Cronbach's Alpha

34 .856

The most common measure in which we will measure our questionnaire is Cronbach’s Alpha in
which reliability are measure. It is mostly preferred and used when there are multiple Likert scale
questions in questionnaire or survey form. So in order to measure the reliability of all the
questions we use Cronbach’s Alpha. There were 22 questions based on the personality Type and
4 questions based on the Risk. This will impact on the investment management. And other 8
questions based on investment management. Total 34 are the questions to see the responded
response. The main purpose on this questionnaire is to show positive correlation in personality to
investment management and risk aversion to investment management. Each question was based
on point Likert scale in which 1 point was greater in number indicating strongly agree and 5
point was last number indicating strongly disagree. So in order to measure the reliability of
questions Cronbach’s Alpha was run on sample 100 students. After the little bit of process many
tables was formed by SPSS. From them the first one major and most important table generated
was reliability statistics table that provide actual value of Cronbach’s Alpha as shown above. As
we can see that Cronbach’s Alpha generated output is .856 which quite acceptable. General
acceptability is .70. Our questionnaire Cronbach’s Alpha is .856 so it is more reliable
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Table 4.2 Correlations

Investment
Personality type Risk aversion management
Risk aversion Pearson Correlation 606** 1 .706**
Sig. (2-tailed) .000 .000
N 100 100 100
**
Personality type Pearson Correlation 1 606 .646**
Sig. (2-tailed) .000 .000
N 100 100 100
** **
Investment management Pearson Correlation .646 .706 1
Sig. (2-tailed) .000 .000
N 100 100 100
**. Correlation is significant at the 0.01 level (2-tailed).

When we have to measure the strength or assume linear connection between two or more than
two variables the correlation is the best method help to measure the relationship of two are more
than two variables. Correlation coefficient (r) is the number which indicates both direction and
magnitude of association between two or more than two variables. The direction is indicated by
sign of coefficient correlation whereas the strength is showed by the direction of correlation
coefficient r from zero +,1 shows perfect correlation as -.1 shows perfect negative correlation
between two variables looking and reviewing the above table and contracting with our designed
hypothesis.
Person correlation table shows that value is increased by 0.01 which is high Significant. Which
show that there is positive correlation between personality type, risk and investment
management? Which means by changing personality type or increasing the risk the investment
also increase and when risk is decrease the investment also decrease. There is high significant
and positive correlation 2
Table 4.3.1 Model Summary
Standard.
Model R R2 Adjusted R2 Error of the Estimate
1 .758a .574 .565 .44375
a. Predictors: (Constant), Risk aversion, personality type
b. Dependent Variable investment management
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Table 4.3.2 ANOVAb

Model Sum of Squares df Mean Square F Sig.
1 Regression 25.744 2 12.872 65.368 .000a
Residual 19.101 97 .197
Total 44.845 99
a. Predictors: (Constant), Risk aversion, personality type
b. Dependent Variable: Investment management

As the average level of measuring significance level is .111. According to our results in table the
significance level that we have found is .0001. This is under 1 that shows there is high level of
certain with variables that we have selected and the hypothesis Made is proved to be authentic
and reliable
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Table 4.3.3 Coefficientsa

Standardized
Un standardized Coefficients Coefficients
Model B Standard. Error Beta t Sig.
1 (Constant) .250 .235 1.063 .290
Personality type .505 .122 .346 4.149 .000
Risk aversion .438 .073 .497 5.965 .000
a. Dependent Variable: Investment management

Now let us give us more center of attention to the output Review. In which first we will have to
look at the F-test, which need to be statistically significant. If it is same as expected then model
is called to be significant. The R 2 is .574 which is means that only approximately 6% of the
variance of investment management is accounted for by the model, in the case personality type
and risk aversion

The Equation that defines our model is:

Yi= a+bX+cX

 Where Yi indicates the outcome we want to predict.

 A is the constant also called intercept
 B is the slope
 C is the Slope
 X define the scope of the subject

Putting the values in equation

Investment management = .250+.346(personality type) +.497(risk aversion)

The above equation shows when there is increase in value of appraisal system by 1 the
investment management increase by .345, .497 which told us that there positive change on
independent variable.

4.4: Testing the Hypothesis:

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Table 4.3.1 Model Summary

Standard.
Model R R2 Adjusted R2 Error of the Estimate
1 .758a .574 .565 .44375
a. Predictors: (Constant), Risk aversion, personality type
b. Dependent Variable investment management

As per as primary data analysis results H1 is accepted, that there is significant relationship of
personality type and risk aversion on investment management.

5 Conclusions:
This research come up with different interesting facts and figures, this research contains certain
recommendations and suggestion for the further researches. The aim of this study was analyzed
in the SZABIST Campus Larkana, we have found the key finding was conducted the primary
data by done the survey in SZABIST Campus Larkana and secondary data, with this it has
provided the large pool of ideas for further researchers.
5.1 summaries of Findings:
[ CITATION Cli08 \l 1033 ], acknowledged that the personality traits has become the effective tool in
identifying that which type of investment decision management will be good according to their
needs and preferences because everyone have same need to get return but it different in nature
and preferences of the investors according to personality trait and risk aversion some borrow for
the long term investment and some go with the short terms investments, As this concludes that
openness to experience personality traits go with the long term investment why because they
need creativity, innovation etc. Extraversion personality type people go with short term
investment and Neuroticism Personality type avoid the risk and behave as a risk neutral. While
seeing this research we have proceeded with this research. That’s why we went for this research
of investment management and personality type in context of Larkana, Pakistan and to know that
which type of investment are more preferring according to their personality type. We have
conducted the Primary data “Survey conducted by borrowing the Likert Scale in which we have
focused to the senior batches of the SZABIST Campus Larkana” as well as secondary data
“Literature Review by getting different researches thoughts according to this research topic”.
Data is collected and analyzed by the statistical tool SPSS by calculating different models,
Regression, Correlation and Reliability Analysis. According to our primary data collection by
taking survey, we have come up with results that personality type and risk aversion have the
positive impact on the investment. With the increase of personality type according to his need the
investment management will also increase, why personality type become different from time to
time because every individual have different needs and preferences, demographics factors
changes in terms of income and age it effects on the needs, so that’s why with the increase of the
personality type is directly related to the Investment management. Risk aversion has also positive
relationship with the investment management, because when age increase people try to make
more savings for the future like: retirement planning, family planning etc. which can lead more
investment to get more return in term to predict the future.
Due to some limitations our research doesn’t evaluate the all population but our outcomes are
based on the basis of primary data and secondary data.
5.2Limitation:
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While conducting this research on present learning for that there were some limitations related to
our topic. Limited time was the big constraint while conducting this research because of that we
can’t surveyed to all the population of the university students related to our topic, therefore our
results depends upon the sample size which shows the final results. If we have more time then
we can review by doing survey from different type of people by going different universities of
Larkana we have just focused on the SZABIST.
5.3 Recommendations:
Our Study doesn’t cover all the things related to the investment management. That’s why we
recommend whenever you do research on personality trait and investment management focus on
all the factors related to the investment management and also demographics factors, because
demographics factors will tell you with the spending of time what will be the impact will create
in investment management decision when change in personality traits. More specific research
will be you should conduct the research in highlighting areas like: impact of demographics
factors, personality traits, risk aversion on investment decision making. Different people have
different perception related to this topic some have negative impact and other have positive
depends, if there is negative correlation then why it is negative and to cope up all the things you
should be supposed to present them to cope up from that problem.
5.4Further Researches:
This research comes up some interesting consequences. Like: in Literature Review, some
Researchers has that personality traits and risk aversion have negative impact on investment
management some have positive and according it differentiate because of the different culture
and different society that’s why it differentiates from all perspectives so this research could be
conducted in the future.
Another major thing is demographics factors, like: age, gender, income etc. how they are
impacting to the personality traits then how it creates to take risk and what will be the decision
related to the investment so it can also conducted in future.