RELATIONSHIP BETWEEN PERSONALITY TRAITS AND THE PSYCHOLOGICAL BIASES OF RETAIL INVESTORS – AN EMPIRICAL STUDY

Abstract

The role of personality in determining psychological bias has received limited attention and therefore, it is considered pertinent to complete the conceptualization of antecedents to psychological biases. The methodology of the study is based on primary data collected through well framed and structured questionnaire to elicit the perception of retail investors in the share market. Simple random sampling has been used to collect responses from the retail investors. Correlation analysis matrix has been derived to determine the relationship between psychological bias and personality traits. Factor analysis by principal component method has been applied to reduce the number of psychological biases and personality traits into ten meaningful factors and seven meaningful factors respectively. Major findings relating to the correlation between personalities and psychological biases of the sampled respondents revealed that three distinct personalities exhibit significant relationship with unique psychological biases.The investigation indicated the importance of taking psychological biases into account while studying the financial, economic and trading decisions of retail investors. Further, the results of the study has demonstrated that psychological biases are related to personality traits and thus knowledge of personality traits may assist in preventive counselling so as to minimise the influence of psychological biases on the retail investors.