The Influence of Personality Traits on Households’ Financial Risk Tolerance and Financial Behaviour

Using a large sample that can represent the Dutch population, this article mainly studies the determinants of financial risk tolerance. I propose that the big five personality traits are the potential factors that can explain differences in financial risk tolerance among individuals. Furthermore, this article examines the effect of personality traits on the actual financial behaviour of households through financial risk tolerance. I find that all the big five personality traits including extraversion, agreeableness, conscientiousness, emotional stability and intellect significantly predict financial risk tolerance. Additionally, these personality traits as instrumental variables can also indirectly predict the financial behaviour of households. JEL: D10, D14, D1