Nº 22-16: Personality Traits and Investment Styles

We collected detailed personality traits data and preferred investment styles of participants from the German population. We find a significant relationship between personality traits and styles. Then we established a personality-based style profiler based on a least-distance algorithm. We tested its out-of-sample performance. The results of AB testing show that the style profiler provides significantly better fitting style recommendations than a random recommendation. Moreover, including socio-economic characteristics increases the fit.
Our results suggest that further research on wealth management could benefit from including the personality of individual investors as a crucial factor, contributing to more satisfying recommendations helping people to invest consistently over time.