Behaviour and Biases of Retail Investors: Task or Trait?

Abstract

We ask to what extent task knowledge and tactics, or enduring personality traits, predict behaviour and biases in a stock trading setting. We base our study on an exceptionally wide-ranging dataset: responses to a self-report survey, together with transactional data of the same individual customers of a UK brokerage. From the survey we estimate measures of domain-general personality traits, such as the Big Five, and task-related measures of financial literacy, competency and attitude specific to trading. Our results show the dominance of task measures over trait measures, when predicting nine different dependent variables of investment performance, biases and portfolio activity. We argue that researchers into financial decisions should consider a rich set of explanatory factors.