Abstract
Investment decisions form a major part of every individual’s life. Behavioral finance which puts forward a new dimension in the field of finance recognizes that investment decisions are made after considering numerous psychological, economical and social factors. One of the important criteria considered while making any such decision is the risk. It includes uncertainties associated with the investment opportunity as well as the investors’ risk-bearing capacity. Investors’ risk-bearing capacity is in turn determined by numerous other aspects. An effort is made here to determine whether the risk-bearing capacities of investors are influenced by the demographic factors and personality traits. 120 investors of Kerala State were selected as the sample for this purpose. Analytical results indicated that the risk-bearing capacity is dependent on gender, occupation, and monthly income of the investors. Further, it was noticed that those who have low neuroticism scores and high scores in agreeableness, extraversion, and conscientiousness took higher risks compared to others. This indicated that neuroticism trait was found to have a negative correlation with risk-bearing capacity whereas; agreeableness, extraversion, and conscientiousness were found to have a positive relation. The study concluded that factors like demography and personality have a strong influence on an investor’s risk-bearing capacity.
Highlights
The third part is related to risk-bearing capacity, and the final part dealt with statements related to the personality traits exhibited by them
Further analysis of the chi-square results indicates that investors’ risk-bearing capacity is dependent on their gender as the findings show a p-value of .008 which is significant at a 5% level of significance
This study was carried out to ascertain the impact of demographic factors and personality traits on the risk-bearing capacity of the investors
Summary
People take a variety of decisions considering their pros and cons. All these decisions are based on their understanding level, age, moral values they hold, their personality, the urgency of the situation, etc. When one makes an investment decision, they consider what returns they will get from investing in that particular product and what will be the risk they would be taking while investing. Risk is a major component of investment, understanding the nature of risk, and the capacity to take risks becomes a very essential part of investors’ decisions. At the time of decision making regarding any investment opportunity, risk accompanying that product becomes a major constituent of that decision (Dhiman & Raheja, 2018)
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