Financial risk tolerance of individuals from the lens of big five personality traits – a multigenerational perspective

Abstract

Purpose This study aims to analyse the impact of the big five personality traits on the financial risk tolerance of individuals. Furthermore, it also examines the differences in personality traits and financial risk tolerance across four generations: baby boomers, Generation X, millennials and Generation Z. Design/methodology/approach The data constituted 869 responses from Indian individuals, collected using a self-administered structured questionnaire using a convenience sampling technique. Findings Structural equation modelling analysis showed that openness to experience, extraversion and neuroticism had a significant impact on financial risk tolerance. Multivariate analysis revealed the role of specific personality traits in predicting the financial risk tolerance of generational cohorts. Mean difference showed that millennials and Generation Z had the greatest risk tolerance, whereas the tolerance levels were lower for Generation X and baby boomers. Research limitations/implications This research provides insights into the role of personality on financial risk-taking among generational cohorts in India. Thus, these results cannot be generalised for other risk-taking domains or outside the Indian context. Originality/value This study’s results align with the pulse rate hypothesis of generational theory and contribute to the growing field of behavioural economics and finance. It provides a perspective of the emerging economy of India, where behavioural finance studies are still at a nascent stage.