Beyond the Big Five: How Dynamic Personality Traits Predict Financial Risk Tolerance?

Abstract The present study examines the impact of dynamic personality traits (emotions, financial self-efficacy, trait anger, resilience, and intolerance of uncertainty) on the financial risk tolerance of an investor. To that end, the study uses data collected from 486 stock market investors adopting a structured questionnaire, and the hypothesised relationships are evaluated through structural equation modelling. Results indicate that financial self-efficacy, positive emotion, and resilience improve the investor’s financial risk tolerance, whereas intolerance of uncertainty, trait anger, and negative emotions bear a negative influence on financial risk tolerance. These findings are novel to the financial risk tolerance literature and deepen our understanding of the precursors of risky investment behaviour. Further, this study entails several practical implications for financial advisors and wealth managers.