PERSONALITY TRAITS AND IRRATIONAL DECISION MAKING OF INDIVIDUAL INVESTORS: EVIDENCE FROM INDIA USING PLS-SEM APPROACH

Abstract

The main objective of this research paper is to study the impact of Big Five personality traits on the investment decisions of individual investors in India and also to explore whether the overconfidence bias mediates the relationship or not through variance-based structural equation model. Data are collected using a standardised questionnaire from 203 individual investors of Chennai city and analysed using SmartPLS 3. Through the variance-based SEM, it is found that agreeableness and conscientiousness have no relationship with irrational investment decision-making. Overconfidence fully mediates the relationship of extraversion and neuroticism with irrational investment decision-making and partially mediates the relationship between openness and irrational investment decision-making. This study makes a unique contribution by not only studying the relationship between personality traits and irrational investment decision-making through the lens of individual investors, but also analysing the mediating role of overconfidence in that relationship.