Journal of Behavioral Finance

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Investors' Personality Influences Investment

Decisions: Experimental Evidence on Extraversion
and Neuroticism

Andreas Oehler, Stefan Wendt, Florian Wedlich & Matthias Horn

To cite this article: Andreas Oehler, Stefan Wendt, Florian Wedlich & Matthias Horn (2017):
Investors' Personality Influences Investment Decisions: Experimental Evidence on Extraversion and
Neuroticism, Journal of Behavioral Finance, DOI: 10.1080/15427560.2017.1366495

To link to this article: http://dx.doi.org/10.1080/15427560.2017.1366495

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 JOURNAL OF BEHAVIORAL FINANCE
https://doi.org/10.1080/15427560.2017.1366495

Investors’ Personality Influences Investment Decisions: Experimental Evidence

on Extraversion and Neuroticism
Andreas Oehlera, Stefan Wendtb, Florian Wedlich a
, and Matthias Horna
a
Bamberg University; bReykjavik University

ABSTRACT KEYWORDS
The authors analyze the impact of individuals’ degree of extraversion and neuroticism on their Investor personality;
decision making in an experimental asset market. To establish this link between research on Investment behavior;
experimental asset markets and social psychology the authors use a unique approach that Decision making; Behavioral
combines a questionnaire designed to assess individuals’ degree of extraversion and neuroticism finance; Experimental asset
Downloaded by [Purdue University Libraries] at 15:45 26 September 2017

markets
and an experimental asset market to assess individual financial decision making. The dataset
combines 364 undergraduate business students’ questionnaire responses and their trading
behavior in the asset market. The authors find that extraversion and neuroticism significantly
influence individuals’ behavior in the experimental asset market. Specifically, more extraverted
individuals pay higher prices for financial assets and they buy more financial assets when assets are
overpriced than less extraverted individuals do. More neurotic individuals hold less risky assets in
their financial portfolios than less neurotic individuals do. Although a large part of the explanatory
power appears to be driven by gender differences, the authors still find significant impact of
extraversion and neuroticism after controlling for gender effects. The study findings suggest that
further research on financial markets could benefit from including personality of market
participants as a crucial explanatory factor.

Introduction
“The goals of experimental finance are to understand
human and market behavior in settings relevant to
finance” (Asparouhova and Bossaerts [2015]). In this
study we provide, to our knowledge, the first analysis
that combines 2 large strands of research in this manner.
We focus on investors’ personality as a fundamental
research agenda in social psychology and on experimen-
tal asset markets which have been addressed in the
finance literature for more than 3 decades to gain deeper
insight into investor behavior.
Experimental asset markets have been designed to
examine informational efficiency (e.g., Miller, Plott, and
Smith [1977]), detect allegedly irrational behavior as
cause of price bubbles and crashes (e.g., Smith, Suchanek,
and Williams [1988]), and identify factors that influence
price deviations from fundamental values (e.g., King
[1991], Haruvy and Noussair [2006]),1 or to reveal
behavioral biases, such as the disposition effect (e.g.,
Weber and Camerer [1998], Oehler, Heilmann, L€ager,
and Oberl€ander [2003]) or overconfidence (e.g., Kirchler
and Maciejovsky [2002]). The analysis of individual per-
sonality, on the other hand, reflects a long research
tradition in social psychology (e.g., Goldberg [1993],
Pervin [1996], Hogan, Johnson, and Briggs [1997], John,
Robin, and Pervin [2008]) and has been integrated into
research in behavioral finance in general (e.g., Durand,
Newby, and Sanghani [2008]). However, individual per-
sonality has barely been integrated into studies that apply
experimental asset markets so far.2 With our study we
focus on this gap in the literature.
We analyze causal effects of individual investors’ per-
sonality on their decision making in financial markets.
The application of an experimental asset market is of
particular interest: It allows us to diminish the influence
of external effects such as heterogeneous information.
Specifically, we match individual trading behavior in a
computerized experimental asset market with data on
the individuals’ personality traits, extraversion and neu-
roticism. Among the 5 personality traits that later on
were integrated in the Big Five taxonomy3 (Goldberg
[1981, 1993])4, extraversion and neuroticism had turned
out to be most influential on individual decisions (e.g.,
Eysenck and Eysenck [1969] and Costa and McCrae
[1980]). Because extraversion and neuroticism interact
with individuals’ emotional states and their locus of

CONTACT Andreas Oehler andreas.oehler@uni-bamberg.de Bamberg University, Kaerntenstrasse 7, Bamberg 96045, Germany.
Supplemental data for this article can be accessed on publisher’s website.
© 2017 The Institute of Behavioral Finance
 2 A. OEHLER ET AL.
control, which in turn also influence individual invest-
ment behavior (e.g., McInish [1980], Lo, Repin, and
Steenbarger [2005]),5 we control for these factors in our
analysis. Because women and men appear to differ from
each other with respect to personality (e.g., Rammstedt,
Kemper, Klein, Beierlein, and Kovaleva [2012]) and
investment behavior (e.g., Barber and Odean [2001],
Dorn and Huberman [2005], Mayfield, Perdue, and
Wooten [2008]) we also control for gender effects.
Our empirical analysis combines data from a ques-
tionnaire and an experiment among 364 undergraduate
business students. The questionnaire is configured to col-
lect data on the participants’ degree of extraversion and
neuroticism and their locus of control and emotional
states. The experiment is designed to identify the partici-
pants’ investment decisions and the underlying return
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expectations and risk behavior. We base the experiment
on the well-established asset market structure of Smith
et al. [1988], which allows an examination of price devia-
tions from fundamental values. While many studies that
use this asset market structure examine market outcomes
at an aggregate level (e.g., Caginalp, Porter, and Smith
[2001], Noussair, Robin, and Ruffieux [2001], Andrade,
Odean, and Lin [2012]), we focus on market participants’
behavior at the individual level. The dividend-paying
nature of Smith et al.’s [1988] asset market structure
appears to be particularly appropriate to analyze patterns
of individual financial decisions because it “captures a
structure found in many assets traded in the field, such
as dividend-paying stocks” (Noussair et al. [2001], p. 88).
Our contribution to the literature is threefold. First,
we contribute to a largely underexplored research area
and provide, to our knowledge, the first study that
directly links personality traits with individual invest-
ment decisions in an experimental asset market. We ana-
lyze a unique dataset including data on 364 individuals’
degree of extraversion and neuroticism and their deci-
sions in the experimental market. Second, the combina-
tion of data from the questionnaire and from the
experiment allows us to directly analyze how individuals’
degree of extraversion and neuroticism influences their
holdings of risky assets and their trading activity depend-
ing on the price of risky assets. Third, in a comprehen-
sive analysis we are able to differentiate the impact of
individual extraversion and neuroticism from gender dif-
ferences in personality and from individuals’ locus of
control and their emotional states.
The main results of our analysis are as follows. First,
more extraverted individuals pay higher prices for finan-
cial assets and buy more financial assets when assets are
overpriced than less extraverted individuals do. Second,
more neurotic individuals hold a smaller number of risky
assets in their financial portfolios than less neurotic
individuals do. Third, although individuals’ gender has
strong explanatory power regarding their behavior in
experimental asset markets, we find that extraversion
and neuroticism even influence behavior beyond gender
differences. The results provide implications for financial
service providers and academics alike. Financial service
providers might consider offering more personalized
financial advice to reflect that, for example, investors
with high values in neuroticism prefer less risky portfo-
lios than less neurotic investors do. This can help finan-
cial service providers to obey the Markets in Financial
Instruments Directive (MiFID), which requires that, for
example, individuals’ ability to bear losses and their
investment objectives including their risk tolerance be
taken into account. In this sense, assessing personality
traits can give hints with respect to risk preferences and
risk profile. Moreover, as more extraverted individuals
buy more financial assets when these assets are over-
priced than less extraverted individuals do, financial ser-
vice providers might consider to focus more clearly on
explaining—in particular to more extraverted individu-
als—that present performance is no predictor of future
performance, and therefore, can call attention to the risk
of buying overpriced assets. Academics should consider
our results in further research, for example, to explain
and predict investors’ behavior more accurately or to
check results’ robustness by considering differences in
personality traits. The influence of negative or positive
affect on financial decisions, for example, should be
revisited with respect to potential interaction with indi-
viduals’ degree of extraversion and neuroticism.
The article is organized as follows. In the second sec-
tion we present related research on the impact of extra-
version and neuroticism on financial decision making. In
addition, we discuss research on the relationship among
these personality traits and gender, age, locus of control,
and emotional states. We derive the hypotheses for our
empirical analysis in the third section. We describe our
questionnaire, the experimental design, and the method-
ology in the fourth section. In the fifth section we present
our empirical results. In the sixth section we discuss the
implications of our findings and conclude.
Related literature
Extraversion
Extraverted subjects tend to be more optimistic, excite-
ment seeking, and active (e.g., Costa and McCrae
[1992]) and they appear to pay more attention to positive
and less attention to negative information (Noguchi,
Gohm, and Dalsky [2006]) than do introverted (i.e.,
hardly extraverted) subjects. A number of studies focuses

on potential impact of the degree of extraversion on
financial decisions and, in particular, on the attitude
toward financial risks. The results of these studies, how-
ever, are mixed.
Durand et al. [2008] conducted a mail survey and
found that extraversion has a positive relationship to
stock exposure in a sample of 21 survey respondents.
Assuming that stocks are generally considered as a risk-
ier asset class, individuals with higher degrees of extra-
version appear to take more risk to achieve higher
returns; however, when calculating realized standard
deviations of investors’ portfolios as simple ex post vola-
tility measure, they did not find a significant impact of
extraversion. Durand, Newby, Peggs, and Siekierka
[2013] addressed the results of Durand et al. [2008] and
conducted an experiment among 115 students to study
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their investment behavior. They did not find a significant
relationship between extraversion and portfolio risk.
Mayfield et al. [2008] conducted a survey among busi-
ness school undergraduates and discovered that more
extraverted subjects tend to invest a higher proportion of
their money in the stock market and trade more fre-
quently than less extraverted subjects do. Moreover, they
found a negative, but statistically insignificant relation-
ship between extraversion and risk aversion. The results
of Brown and Taylor [2011] suggest that more extra-
verted individuals are indebted at higher levels in, for
example, personal loans, and they hold less financial
assets, such as bonds, than less extraverted individuals
do. In this sense, more extraverted individuals appear to
be more optimistic to be able to repay their debts. In
addition, their findings indicate that more extraverted
individuals primarily finance current consumption
instead of reducing long-term risks by investing in, for
example, retirement provisions which implies that more
extraverted individuals are willing to take more risks
than less extraverted individuals are.
Nicholson, Soane, Willman, and Fenton-O’Creevy
[2005] analyzed the influence of personality on risk
behavior in a broader context. They employed a ques-
tionnaire, the Risk Taking Index, to measure overall and
domain-specific risk propensity and combined these
data with personality traits. They found that high scores
in extraversion predict financial and overall risk taking.
In particular, sensation seeking as one subscale of extra-
version appears to influence risk taking (see also
Zuckerman [1979]). Using a self-designed questionnaire
Wong and Carducci [1991] focused on the influence
of sensation seeking on risk taking in gambling and
everyday financial matters. They found that high sensa-
tion seekers are more willing to accept risks than low
sensation seekers. Morse [1998] used a similar design
as Wong and Carducci [1991] and Belcher [2010]
JOURNAL OF BEHAVIORAL FINANCE 3
conducted a survey among undergraduate business stu-
dents. Both studies did not find a significant influence of
the degree of sensation seeking on risk taking in the con-
text of portfolio decisions. Kowert and Hermann [1997]
found similar results for sensation seeking, but did not
find significant evidence for an overall positive relation-
ship between extraversion and risk taking. Pan and
Statman [2013] conducted a questionnaire among more
than 2,500 subjects and found that more extraverted sub-
jects are more willing to accept risks than less extraverted
ones are. Becker, Deckers, Dohmen, Falk, and Kosse
[2012] found similar results as Nicholson et al. [2005]
when employing the design proposed by Dohmen, Falk,
Huffman, and Sunde [2010] to elicit risk attitudes.
Eysenck [1967] explained the risk-taking behavior of
extraverted subjects with their demand to raise their state
of arousal. Because extraverted individuals seem to be
chronically under-aroused, they accept higher degrees of
risk to reach their optimal level of arousal (see also
Eysenck [1981]).
Furthermore, Pan and Statman [2013] found that
more extraverted individuals exhibit more overconfi-
dence than less extraverted individuals do. This means
that extraverted individuals are overoptimistic with
respect to their skills and knowledge, their estimates, and
potentially favorable events.6 Nosic and Weber [2010]
and Merkle [2011] found a positive relationship between
overconfidence and risk taking, for example, in the con-
text of financial decisions, and in this sense provided
empirical evidence for Heath and Tversky’s [1991] com-
petence hypothesis. The competence hypothesis postu-
lates that subjects prefer betting on an uncertain event in
fields which they consider themselves to be competent
and knowledgeable in, whereas they tend not to bet on
uncertain events in fields in which they feel uninformed
and not competent. Moreover, people who feel compe-
tent and knowledgeable even tend to pay a premium to
bet on their judgments, which, in turn, indicates more
risky behavior.
Neuroticism
Subjects with a high degree of neuroticism tend to be
more pessimistic (e.g., Williams [1992]) and more anx-
ious, are more depressed (e.g., Bolger [1990], Costa and
McCrae [1992]), and appear to pay more attention to
negative information and less attention to positive infor-
mation (Noguchi et al. [2006]) than subjects with a
low degree of neuroticism do. Cloninger [2000] and
Lommen, Engelhard, and van den Hout [2010] sup-
ported this argument and found that more neurotic
subjects exhibit more fear of uncertainty and ambiguity
than less neurotic subjects do and want to avoid such
 4 A. OEHLER ET AL.
situations. In a financial context, Niszczota [2014] found
that investors from countries with higher scores in neu-
roticism invest less in foreign equities and foreign debt
securities. Niszczota [2014] argued that more neurotic
investors want to avoid uncertainty, which is associated
with foreign investments. Gambetti and Giusberti [2012]
found that more anxious subjects prefer less risky asset
classes and portfolios than less anxious subjects do.
However, the findings with respect to the impact of
neuroticism on risk behavior are partly contradictory.
Durand, Newby and Sanghani [2008] found that the
portfolios of more neurotic investors exhibit higher stan-
dard deviations of daily returns than portfolios of less
neurotic investors.7 This finding indicates that neurotic
individuals invest more in stocks with more volatile
returns, which implies higher riskiness. Durand, Newby,
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Peggs, et al. [2013] confirmed these results and found
that more neurotic investors bear a higher portfolio risk
than less neurotic investors do. On the other hand, Nich-
olson et al. [2005] found that low scores in neuroticism
predict financial and overall risk taking in the sense that
more neurotic individuals behave less risky than less
neurotic ones do. Becker et al. [2012] found similar
results and document a negative relationship between
neuroticism and risk-taking behavior. Mayfield et al.
[2008] indicate that more neurotic individuals invest
smaller amounts in more risky assets, trade less, and are
more risk averse than less neurotic individuals are.
Relationship to age, gender, locus of control
and emotional states
Age and gender appear to influence financial decisions in
the sense that, for example, younger subjects hold more
risky (Barber and Odean [2001], Dorn and Huberman
[2005]) and less diversified portfolios than older subjects
do (Goetzmann and Kumar [2008]) and men tend to
trade more excessively (Barber and Odean [2001]) and
invest in a riskier way than women do (e.g., Jianakoplos
and Bernasek [1998], Hariharan, Chapman, and Domian
[2000], Mayfield et al. [2008]). Furthermore, individuals’
degree in extraversion and neuroticism differs with
respect to age and gender. Rammstedt et al. [2012] found
that older individuals are less extraverted than younger
individuals and that women are more extraverted and
neurotic than men.8
According to, for example, Morris and Carden
[1981] and Kovaleva et al. [2012], an internal locus of
control is positively related to extraversion, whereas
an external locus of control is positively related to
neuroticism. This means that neurotic subjects
assume that events are influenced by external forces
and not by themselves, whereas extraverted subjects
think they are able to influence the outcome of
events. The findings on the influence of locus of con-
trol on investment behavior are mixed. McInish
[1980] found that students with an external locus of
control prefer less risky portfolios than subjects with
an internal locus of control do, whereas McInish
[1982] found that individual investors with an exter-
nal locus of control choose riskier portfolios than
investors with an internal locus of control do.
Moreover, emotional states such as positive or nega-
tive affect appear to significantly correlate with extraver-
sion and neuroticism (e.g., Costa and McCrae [1980],
Larsen and Ketelaar [1989]). According to these findings,
extraversion is positively correlated with positive affect,
while neuroticism is positively correlated with negative
affect. Emotional states influence, for example, risk tak-
ing (e.g., Isen and Patrick [1982], Forgas [1995], Grable
and Roszkowski [2008]), the judgment of subjective
probabilities of positive and negative events and expecta-
tions (e.g., Wright and Mischel [1982], Johnson and
Tversky [1983], Brown [1984]), information processing,
and the application of heuristics (e.g., Schwarz and Clore
[1983], Ruder and Bless [2003]).
Hypotheses development
Impact of extraversion
As initially developed in the literature analyzed previ-
ously, more extraverted investors appear to be more opti-
mistic and assign higher subjective probabilities to both
higher dividend payments and asset sales that result in a
financial gain, which in turn is consistent with the find-
ings of positive correlation of extraversion with positive
affect and overconfidence. Given these findings on the
relationship between extraversion and risk behavior, we
assume that more extraverted investors are more willing
to invest in risky assets than less extraverted investors
are. In addition, investments in risky assets might fulfill
the more extraverted investors’ need for excitement and
raise their state of arousal which leads us to hypothesize:
Hypothesis 1: The higher the degree of investors’ extra-
version, the higher the number of risky assets they
hold in a financial portfolio is.
With respect to trading activity, we expect that more
extraverted investors are willing to pay higher prices for
assets than less extraverted investors are, because they
are more optimistic regarding dividend payments and
future prices at which they can resell their assets.
Hypothesis 2 summarizes these effects:
Hypothesis 2: The higher the degree of investors’ extra-
version, the higher the price at which they buy finan-
cial assets is.

In a neoclassic fully rational setting, overpriced assets
would be characterized by prices above the level that is jus-
tified by expected dividend payments. A sufficient number
of investors would sell overpriced assets or refrain from
buying them and, instead, try to identify and buy under-
priced assets. These market mechanisms would practically
instantaneously adjust prices to the justified price level.
However, Greenwood and Nagel [2009] and Griffin,
Harris, Shu, and Topaloglu [2011] showed that professional
and retail investors buy overpriced assets in bubbly mar-
kets. The behavioral explanation for this pattern reflects
that individuals might still act (boundedly) rationally—
although buying at prices above the level that is justified by
the expected dividend payments—as long as they expect
further price increase in the sense of an even stronger devi-
ation from prices justified by expected dividend payments.
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Shiller [2000], Fisher and Statman [2002], and Vissing-Jor-
gensen [2003] provided survey evidence that, indeed, a
considerable part of market participants buys stocks
although knowing that stocks are already overpriced, how-
ever, assuming that the trend of price increases will con-
tinue. This means that these investors would assign rather
low probabilities to short-term price reversals and that they
are optimistic about being able to sell the assets before the
reversal (implicitly—probably overconfidently—thinking
they were skillful enough to time the burst of the bubble).
If investors supposed to have such superior market timing
skills, overpriced purchases would—for these investors—be
characterized by prices even beyond market-wide expecta-
tions about future price developments, although these mar-
ket-wide expectations might already deviate from expected
dividend payments. However, Griffin et al. [2011] show
that most retail investors are not that skillful and still buy
assets after the peak of a bubble was reached and prices
start to crash. We assume that more extraverted individuals
are more optimistic regarding further price increases and
their ability to sell their assets at higher prices and that they
consider the threat of short-term price reversal to a lesser
degree. We, therefore, hypothesize:9
Hypothesis 3: The higher the degree of investors’ extra-
version, the higher the number of overpriced financial
assets they buy is.
Impact of neuroticism
With respect to the literature we expect that neurotic
investors are reluctant to hold risky assets because they
are more pessimistic about future asset prices and divi-
dend payments than nonneurotic investors. Further-
more, holding fewer risky assets allows them to reduce
uncertainty with respect to the development of future
asset prices. We hypothesize the impact of the degree of
neuroticism on investment behavior as follows:
JOURNAL OF BEHAVIORAL FINANCE 5
Hypothesis 4: The higher the degree of investors’ neu-
roticism, the lower is the number of risky assets they
hold in a financial portfolio.
Because neurotic investors tend to be pessimistic
about future prices and dividend payments, they poten-
tially fear to be unable to sell their assets at all or that
they would achieve only unfavorable low prices for their
assets. Consequently, more neurotic investors would be
willing to sell their assets at lower prices than would less
neurotic investors:
Hypothesis 5: The higher the degree of investors’ neu-
roticism, the lower the price at which they sell financial
assets is.
In a neoclassic fully rational setting, underpriced
assets would be characterized as assets with prices below
the level that is justified by expected dividend payments.
A sufficient number of investors would buy underpriced
assets or refrain from selling them to not forgo the
expected dividend payments. These market mechanisms
would practically instantaneously adjust prices to the jus-
tified price level. However, in his review regarding asset
markets following the design of Smith et al. [1988], Palan
[2013] stated that assets in these markets typically trade
below the level justified by the expected dividend pay-
ments in the first trading periods. Furthermore, Breaban
and Noussair [2013] showed that scared participants are
willing to sell underpriced assets. The behavioral expla-
nation for this pattern reflects that individuals might still
act (boundedly) rationally—although selling at prices
below the level that is justified by the expected dividend
payments—as long as holding the risky asset causes
more subjectively perceived discomfort (e.g., fear and
stress) than receiving the expected dividend payments
could offset. More neurotic people are more likely to feel
fear and anxiety and are furthermore more pessimistic
regarding the uncertain outcome of future events such as
dividend payments. In addition, they might only assign
low probability to price reversal that would allow them
to benefit from selling at a later point in time. We assume
that more neurotic individuals sell more financial assets
at times when assets are underpriced because holding
risky assets causes them more discomfort and due to
their pessimism regarding future price increases and div-
idend payments. Therefore, we hypothesize:10
Hypothesis 6: The higher the degree of investors’
neuroticism, the higher the number of underpriced
financial assets they sell is.
Questionnaire and experimental design
We analyze the impact of extraversion and neuroticism
on individual investment decisions with a combination
of a questionnaire and an experimental asset market.
 6 A. OEHLER ET AL.

Questionnaire Questionnaire section, the participants get a detailed

instruction about the mechanism of the experimental
The questionnaire is distributed to participants before
asset market including, for example, how to accept and
the start of the asset market and includes sections on
post offers and the dividend structure. The subjects trade
sociodemographics, on the personality traits extraversion
one dividend-paying asset at a time in a continuous dou-
and neuroticism, on positive and negative affect, and on
ble-auction market. Any participant can submit an offer
internal and external locus of control. As sociodemo-
to sell or to purchase an asset or accept offers from other
graphic variables we include age and gender. To measure
subjects. All offers and transaction prices are shown to
personality traits, we use the German version of the Big
all market participants. The number of trades per trading
Five Inventory-10 (hereafter BFI-10, see Rammstedt and
period is only restricted by the availability of sufficient
John [2007], Rammstedt et al. [2012]) which is a short
cash and units of the risky asset. Short selling and bor-
version of the BFI developed by John, Donahue, and
rowing are not allowed.
Kentle [1991]. Rammstedt and John [2007] show that
The asset market consists of 15 trading periods,
the BFI-10, which has been developed especially for
each period lasts 1 minute. We do not allow any
experiments with limited assessment time, is able to
practice rounds. All subjects receive an initial endow-
measure the Big Five dimensions in a valid and reliable
ment of 5 identical risky assets and 3,000 units of
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way and they report high correlations between results

based on the BFI-10 and results based on the full BFI as
well as corresponding items from the more extensive
Revised NEO Personality Inventory (NEO-PI-R) of
Costa and McCrae [1992].11 We select items of Krohne,
Egloff, Kohlmann, and Tausch’s [1996] German version
of the Positive and Negative Affect Schedule (PANAS)
suggested by Watson, Clark, and Tellegen [1988] to mea-
sure positive and negative affect.12 To measure the
degree of internal and external locus of control we use
the questions developed by Kovaleva et al. [2012], which
contain 2 items to measure internal and external locus of
control, respectively. The items on the personality traits
extraversion and neuroticism, on internal and external
locus of control and on positive and negative affect are
measured on a 5-point Likert-type scale ranging from 1
(strongly disagree) to 5 (strongly agree).
In light of the overall empirical design as combina-
tion of questionnaire and experimental asset market,
we choose to employ short item batteries instead of
the full item batteries of, for example, the BFI to
measure the personality traits extraversion and
neuroticism to avoid cognitive overstrain and task
overload among participants.
Experimental design
For the design of the experimental asset market we fol-
low Smith et al. [1988]. The experiment is programmed
and conducted with the software z-Tree (Fischbacher
[2007]). Participants are students enrolled in the under-
graduate corporate finance course in the winter term
2014/2015 at Bamberg University. We run 17 separate
markets, each consisting of 15–23 participants who
are drawn randomly and assigned to one of the
markets. Overall, the experiment includes 364 students.
After answering the questionnaire as described in the
experimental currency. Dividends, Dt, on the risky
assets are drawn with equal probability (25%) out of
4 potential outcomes of 0, 8, 28, and 60 units of
experimental currency independently after each trad-
ing period t. All assets in a market receive the identi-
cal dividend payment. The expected dividend in each
period is 24 units of experimental currency. Each
subject knows the distribution of potential dividend
payments and can easily calculate the expected divi-
dend payment, E(Dt), of an asset as the number of
remaining periods times 24. To avoid potential mis-
calculation or misunderstanding, we additionally pro-
vide all subjects with a table that for each trading
period includes the expected dividend payment for
the remaining trading periods. The assets expire
worthless after the last trading period. At the end of
each period, the subjects additionally get a minimal
riskless interest rate of 1 per mill on the amount of
cash held in the account used for the experiment (if
an amount of cash is held during the entire length of
the experiment of 15 periods, the interest rate
amounts to 1.5%). Whereas the interest rate on the
amount of cash held is riskless, holding the dividend-
paying asset is risky for the subjects due to uncer-
tainty with respect to dividends and future trading
prices.
In 13 of the 17 markets (or 283 of the 364 students)
participants receive a fixed show-up fee of €5. In the
remaining 4 markets (81 students) participants receive a
variable fee that is determined on the basis of the amount
of experimental currency gathered on the individual
account during the experiment. These 4 markets are
used as control group to analyze potential influence of
fixed versus variable payment. The variable fee is calcu-
lated with a rate of 1,000 units of experimental currency
being equal to €1. Given the structure of the experiment,
the expected variable payment is €4.80.13
 JOURNAL OF BEHAVIORAL FINANCE 7

Methodology for the empirical analysis
Variable description
The questionnaire provides us with 2 items on individu-
als’ degree of extraversion and 2 items on individuals’
degree of neuroticism, respectively. We combine the
items on extraversion and determine the median value of
individual i’s responses to get the variable EXTRAVERTi.
Following the same approach, we calculate the combined
variable NEUROTi for individual i’s degree of neuroti-
cism.14 The variables INTLOCUSi and EXTLOCUSi mea-
sure the degree of individual i’s internal and external
locus of control, respectively. Again, the variables are
determined as the median value of the responses to the 2
items from the questionnaire, respectively. Furthermore,
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number of outstanding assets, A, in that market:
PT
1
A
tD1 i;t
Ai D T
(1)
A
where Ai;t is the number of assets held by individual i at
the end of trading period t and T is the total number of
periods (T D 15).
To calculate the average price paid by individual i for
purchases during the experiment we adjust for the
remaining expected dividend payments, Vt , as approxi-
mation of the assets’ fundamental value at the beginning
of each trading period (Equation 2a).15 Beyond this
exogenous variable, however, we also take into consider-
ation that individuals might regard the actual (endoge-
nous) price level in the market as benchmark. This is

the questionnaire includes 3 items to measure individual why we additionally adjust the prices paid for the ex post
i’s positive affect and 3 items to measure individual’s calculated mean transaction price in this trading period,
negative affect. We use the median value of individual i’s Pt (Equation 2b). This means that we analyze relative
responses to form the variables POSAFFECTi and NEG- price deviation from the fundamental value and from the
AFFECTi. The dummy variable GENDERi is assigned a price level in the market.
value of 1 for male subjects and a value of 0 for female
q 1 PT Pq q
Pi;t;n ¡ Vt
i;t
subjects. PiAdjV D tD1 nD1
(2a)
Table 1 provides an overview of the variables used in Qi Vt
our analysis. q 1 PT Pq i;t
q
Pi;t;n ¡ Pt
PiAdjP D (2b)
The experiment provides us with key figures of indi- Qi tD1 nD1
Pt
vidual trading behavior (e.g., assets held, transaction pri-
q
ces, number of asset purchases and sales). where Pi;t;n is the price paid by individual i for purchase
To determine the average number of assets held by n in period t, qi;t is the number of purchases by
individual i during the experiment, Ai , we adjust for the individual i in period t, Qi is the total number of

Table 1. Overview and description of variables.

Variable Description

Panel A: Questionnaire
AGEi Age in years
EXTLOCi External locus of control; determined as median value of 2 items based on Kovaleva, Beierlein, Kemper, and Rammstedt [2012]
EXTRAVERTi Extraversion; determined as median value of 2 items based on the BFI-10
GENDERi Dummy variable which takes a value of 1 when individual i is male and zero otherwise
INTLOCi Internal locus of control; determined as median value of 2 items based on Kovaleva et al. [2012]
NEGAFFECTi Negative affect; determined as median value of 3 items based on the PANAS
NEUROTi Neuroticism; determined as median value of 2 items based on the BFI-10
PAYMENTi Dummy variable which takes a value of 1 when individual i gets variable fee and zero otherwise
POSAFFECTi Positive affect; determined as median value of 3 items based on the PANAS
Panel B: Key figures of individuals’ trading behavior
Ai Average number of assets held during the experiment adjusted for the number of outstanding assets in the respective market
q
PiAdjV Average price paid for purchases during the experiment adjusted by remaining expected dividend payments
q
PiAdjP Average price paid for purchases during the experiment adjusted by mean transaction price
s
PiAdjV Average price received for sales during the experiment adjusted by remaining expected dividend payments
s
PiAdjP Average price received for sales during the experiment adjusted by mean transaction price
QPrem
iAdjV Number of purchases when assets trade above the price justified by remaining expected dividend payments
QPrem
iAdjP Number of purchases when assets trade above mean transaction price
SDisc
iAdjV Number of sales when assets trade below the price justified by remaining expected dividend payments
SDisc
iAdjP Number of sales when assets trade below mean transaction price

Note. Table 1 provides an overview of variables used in the analysis. Panel A includes variables ascertained with the help of the questionnaire for each individual i.
Panel B includes variables from the experimental asset market determined for each individual i. In the left column, we provide the names of the variables in an
alphabetic order. In the right column, we provide the respective descriptions of the variables.
 8 A. OEHLER ET AL.

purchases by individual i during the experiment, Vt assumed bounded rationality. We additionally adjust for
stands for the remaining expected dividend payments the number of outstanding assets, A, in that market.
and is an approximation of the assets’ fundamental value
at the beginning of each period t, Pt is the mean transac-
PT Ps i;t
sDis
nD1 i;t;n
tion price in the market in period t. SDisc
iAdjV D tD1
;
We follow the same approach to calculate the average (A (5a)
s
0 if Pi;t;n  Vt
price received by individual i for sales during the experi- where sDisc D
i;t;n
ment and adjust for the remaining expected dividend s
1 if Pi;t;n < Vt
payments, Vt (Equation 3a). Again, we additionally PT Ps i;t
adjust the prices received for the ex post calculated mean sDis
nD1 i;t;n
SDisc
iAdjP D tD1
;
transaction price, Pt (Equation 3b). (A (5b)
s
0 if Pi;t;n  Pt
s 1 PT Ps i;t
s
Pi;t;n ¡ Vt where sDisc
i;t;n D
PiAdjV D tD1 nD1
(3a) s
1 if Pi;t;n < Pt
Si Vt
s 1 PT Ps i;t
s
Pi;t;n ¡ Pt
PiAdjP D (3b)
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Si tD1 nD1
Pt Correlation analysis
s
where Pi;t;n is the price received by individual i for sale n We calculate nonparametric Spearman correlation coef-
in period t, si;t is the number of sales by individual i in ficients and Kendall’s Tau coefficients between the
period t and Si is the total number of sales by individual i variables EXTRAVERTi and NEUROTi from the ques-
during the experiment. tionnaire and the key figures of individual trading
We define 2 types of overpricing and calculate the behavior generated in the asset markets.
number of purchases by individual i when assets are
overpriced with respect to (1) the exogenous remaining Regression analysis
expected dividend payments, Vt , (Equation 4a) and (2)
the endogenous ex post calculated mean transaction We conduct a cross-sectional regression analysis to mea-
price in the current period, Pt ; (Equation 4b). We make sure the influence of individual’s degree of extraversion
this adjustment following findings in research in behav- and neuroticism on their investment behavior in the
ioral finance that individuals use other benchmarks than experimental asset market. In a stepwise approach we
remaining expected dividend payments and in this sense control for gender and age and for other cognitive
“deviate” from fully rational (neoclassic) behavior. We aspects such as emotional states and locus of control.
additionally adjust for the number of outstanding assets, Additionally, we run regressions including all explana-
A, in that market. tory variables.
To gain insights on Hypothesis 1, we regress the aver-
PT Pq i;t age number of assets held, Ai , on EXTRAVERTi and the
qPrem
n D 1 i;t;n
QPrem
iAdjV D tD1
; series of control variables as independent variables.
( A Additionally, we control for the fixed versus variable
q (4a)
0 if Pi;t;n  Vt payments that our subjects receive. Equation 6 displays
where qPrem
i;t;n D q
1 if Pi;t;n > Vt the full regression model:
PT Pq i;t
qPrem
nD1 i;t;n Ai D b0 C b1  EXTRAVERTi C b2  INTLOCUSi
QPrem
iAdjP D tD1
;
( A q (4b) C b3  EXTLOCUSi C b4  POSAFFECTi
0 if Pi;t;n  Pt
where qPrem
i;t;n D q
1 if Pi;t;n > Pt C b5  NEGAFFECTi C b6  AGEi

C b7  GENDERi C b8  PAYMENTi C e (6)

Following the same approach, we define 2 types of
underpricing and calculate the number of sales by indi-
vidual i when assets are underpriced with respect to (1)
the exogenous remaining expected dividend payments,
Vt , (Equation 5a) and (2) the endogenous ex post calcu-
lated mean transaction price in the current period, Pt ;
(Equation 5b). Again, we make this adjustment due to
We also apply the baseline model as given in
Equation 6 to test our further hypotheses related to
q q
extraversion. We employ PiAdjV / PiAdjP as dependent
variables (instead of Ai ) to test Hypothesis 2 on the influ-
ence of individuals’ degree of extraversion on prices paid
 JOURNAL OF BEHAVIORAL FINANCE 9

for purchases. We use QPrem Prem

iAdjV /QiAdjP as dependent varia- an ordinal scale. However, related to the discussion in
bles to test the influence of individuals’ degree of extra- the literature whether or not Likert-type scales may be
version on their purchases of overpriced assets interpreted as interval data Jaccard and Wan [1996] con-
(Hypothesis 3). clude that the use of Likert-type scales as interval data
We follow a similar approach to test our hypotheses are not expected to affect Type I and Type II errors sub-
related to neuroticism. We apply Equation 7 as full stantially.
regression model to gain insight in Hypothesis 4: To detect potential multicollinearity in our regression
models we calculate the variance inflation factors (VIFs)
Ai D b0 C b1  NEUROTi C b2 INTLOCUSi for the explanatory variables, respectively. Because the
VIFs exhibit values far below 10, we do not assume that
C b3  EXTLOCUSi C b4  POSAFFECTi
(7) multicollinearity significantly influences our results (see,
C b5  NEGAFFECTi C b6 AGEi for example, Hair, Anderson, Tatham, and Black [1995]).
C b7  GENDERi C b8  PAYMENTi C e

s s
We employ PiAdjV /PiAdjP as dependent variables (instead Results
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of Ai ) to test Hypothesis 5 on the impact of individuals’ Descriptive statistics

degree of neuroticism on prices received for sales. We
use SDisc Disc
iAdjV /SiAdjP as dependent variables to test the influ-
ence of individuals’ degree of neuroticism on their sales
of underpriced assets (Hypothesis 6).
When the dependent variables’ values cannot be nega-
tive, this means when using Ai , QPrem Prem Disc
iAdjV , QiAdjP , SiAdjV or SiAdjP
as dependent variables, we provide tobit regressions;
otherwise we use ordinary least squares regressions. We
are aware of the fact that due to the application of
Likert-type scales most of our explanatory variables have
Table 2 reports descriptive statistics of subjects’ charac-
teristics based on the questionnaire for our full sample
(364 participants) in Panel A. The median age is 22
(mean: 22.3) years with a minimum of 19 years and a
maximum of 31 years. Our dataset includes slightly
Disc
more women (n D 197) than men (n D 167). We use the
same version of the BFI-10 as used in Rammstedt et al.
[2012] and developed by Rammstedt and John [2007] to
measure EXTRAVERTi and NEUROTi. The median
value of EXTRAVERTi is 3.5 (mean: 3.6) whereas the

Table 2. Descriptive statistics.

N Mean Med Max Min Std

Panel A: Questionnaire
GENDERi 364
Male 167
Female 197
AGEi 361 22.3 22.0 31.0 19.0 2.0
EXTRAVERTi 364 3.6 3.5 5.0 1.5 0.9
NEUROTi 364 2.8 3.0 5.0 1.0 0.9
INTLOCUSi 364 4.2 4.0 5.0 2.5 0.5
EXTLOCUSi 364 2.2 2.0 4.5 1.0 0.6
POSAFFECTi 364 3.2 3.3 5.0 1.0 0.8
NEGAFFECTi 364 1.5 1.3 4.0 1.0 0.6
Panel B: Key figures of individuals’ trading behavior
Ai .047 .041 .154 .005 .028
q
PiAdjV .659 .566 5.964 –.851 .737
q
PiAdjP –.025 –.021 .768 –.881 .241
s
PiAdjV .758 .604 3.947 –.666 .718
s
PiAdjP .024 .046 1.200 –.585 .238
QPrem
iAdjV .118 .105 .435 .000 .077
QPrem
iAdjP .069 .054 .323 .000 .057
SDisc
iAdjV .036 .023 .185 .000 .039
SDisc
iAdjP .066 .054 .308 .000 .054

Note. Panel A displays descriptive statistics of the variables ascertained with the help of the questionnaire. For each variable we provide the number of individuals’
responses (N), mean value (Mean), median value (Med), maximum value (Max), minimum value (Min), and standard deviation (Std). Example: the median value
of the participants’ level of extraversion (EXTRAVERTi) is 3.5. Panel B displays descriptive statistics of the experimental asset market variables. For each variable
we provide the mean value (Mean), median value (Med), maximum value (Max), minimum value (Min), and standard deviation (Std). Example: The median value
q
of the average price paid by the individuals for purchases adjusted by the remaining expected dividend payments, PiAdjV , is .566.
 10 A. OEHLER ET AL.

median value of NEUROTi is 3.0 (mean: 2.8). Both values
are within 1 standard deviation from values reported by
Rammstedt et al. [2012], who documented a mean value
of 3.7 with a standard deviation of 0.89 for EXTRAVERTi
and a mean value of 2.4 with a standard deviation of 0.84
for NEUROTi, for subjects in the age range from 18 to
35 years. Values for NEUROTi range from 1 to 5,
whereas values for EXTRAVERTi range from 1.5 to 5.
The median value for INTLOCUSi is 4.0 (mean: 4.2)
whereas the median value for EXTLOCUSi is 2.0 (mean:
2.2). Our results are within 1 standard deviation from
those of Kovaleva et al. [2012] who developed the scale
which we also apply and report a mean value of 4.3 (std:
0.76) for INTLOCUSi and a mean value of 2.5 (std: 0.97)
for EXTLOCUSi (age group 18–35 years). Our subjects
exhibit a median value of 3.3 for POSAFFECTi (mean:
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remaining expected dividend payments is higher than the
number of transactions with a trading price above the
average transaction price. With respect to sales below the
price justified by remaining expected dividend payments,
we find that the median value for SDisc
iAdjV is .023 (mean: .036)
Disc
and the median value forSiAdjP is .054 (mean: .066), indicat-
ing that only few individuals sold assets below the price
justified by remaining expected dividend payments.
We provide nonparametric Spearman correlation coef-
ficients and Kendall’s Tau coefficients between the varia-
bles generated from the questionnaire in Table 3 to reveal
statistically significant interdependencies between our
independent variables. Similar to Borkenau and Osten-
dorf [1993], K€orner, Geyer, and Br€ahler [2002], Roth
[2002], Rammstedt and John [2007], and Mayfield et al.
[2008] EXTRAVERTi and NEUROTi are negatively corre-

3.2) and a median value of 1.3 for NEGAFFECTi (mean:
1.5). Based on the full PANAS questionnaire, Krohne
et al. [1996] report a mean value of 2.7 of current positive
affect and 1.5 for current negative affect.
We provide descriptive statistics of the key figures of
individuals’ trading behavior in the experimental asset
market in Panel B of Table 2. The median value of Ai is
.041 (mean: .047). Values range from .005 to .154, meaning
that the individuals hold between 0.5% and 15.4% of the
q
groups’ assets over time. The median values of PiAdjV and
s
PiAdjV are .566 (mean: .659) and .604 (mean: .758), respec-
q s
tively. The median values of PiAdjP and PiAdjP are –.021
(mean: –.025) and .046 (mean: .024), respectively, which
indicates that the majority of participants bought the risky
assets below and sold them above the average trading
price. Because the average prices, which are adjusted by
the remaining expected dividend payments, reach higher
median and mean values than the average prices which are
adjusted by the mean transaction price per period, we con-
clude that trading prices exceed the price justified by
remaining expected dividend payments in most periods
and asset markets. The median values of QPrem Prem
iAdjV and QiAdjP
are .105 (mean: .118). This means that the number of pur-
chases with a trading price above the price justified by
lated at statistically significant levels. EXTRAVERTi is
positively correlated with INTLOCUSi and POSAFFECTi
and negatively correlated with EXTLOCUSi, NEGAF-
FECTi and GENDERi. NEUROTi is negatively correlated
with INTLOCUSi and GENDERi and positively correlated
with EXTLOCUSi and NEGAFFECTi. Furthermore, NEU-
ROTi is negatively correlated with AGEi and with POSAF-
FECTi. Except for the correlation between EXTRAVERTi
and AGEi all correlations between the 2 personality traits
and the other questionnaire variables are statistically sig-
nificant at least at the 10% level.
Correlation analysis
Table 4 reports nonparametric Spearman correlation
coefficients and Kendall’s Tau coefficients between the
variables EXTRAVERTi (Panel A) and NEUROTi (Panel
B) and the key figures of individuals’ trading behavior.
We find a negative correlation between EXTRAVERTi
and Ai which would contradict Hypothesis 1; this corre-
lation, however, is statistically insignificant. The positive
and statistically significant correlations between EXTRA-
q q
VERTi and PiAdjV and PiAdjP support Hypothesis 2, which
states a positive relationship between individuals’ degree

Table 3. Correlations between questionnaire variables (full sample).

GENDERi AGEi EXTRAVERTi NEUROTi INTLOCUSi EXTLOCUSi POSAFFECTi NEGAFFECTi

GENDERi .142 ***

–.210***
–.259***
–.006 –.040 .013 .061
AGEi .124*** .018 –.132** .088* .056 .010 .009
EXTRAVERTi –.185*** .013 –.171** .290*** –.164*** .251*** –.096*
NEUROTi –.228*** –.101** –.133*** –.180*** .238*** –.118** .180***
INTLOCUSi –.005 .070* .235*** –.146*** –.191*** .209*** –.150***
EXTLOCUSi –.036 .044 –.132*** .193*** –.162*** –.045 .176***
POSAFFECTi .012 .007 .206*** –.100** .181*** –.039 .024
NEGAFFECTi .059 .007 –.082* .154*** –.134*** .156*** .023

Note. We report Spearman correlation coefficients (above the diagonal) and Kendall’s Tau coefficients (below the diagonal) between the variables ascertained with
the help of the questionnaire. The symbols , , and  denote statistical significance at the 1%, 5%, and 10% levels, respectively. Example: The Spearman cor-
relation coefficient between the participants’ level of extraversion (EXTRAVERTi) and their level of internal locus of control (INTLOCUSi) is .290 with statistical sig-
nificance at the 1% level.
 JOURNAL OF BEHAVIORAL FINANCE 11

Table 4. Correlations of EXTRAVERTi and NEUROTi with individual trading behavior.

q q
Ai PiAdjV PiAdjP QPrem
iAdjV QPrem
iAdjP

Panel A: Extraversion
EXTRAVERTi –.068 (–.047) .094* (.067*) .120** (.084**) .090* (.064*) .115** (,084**)
n 364 364 364 364 364
q q
Ai PiAdjV PiAdjP QPrem
iAdjV QPrem
iAdjP

Panel B: Neuroticism
NEUROTi –.108** (–.079**) –.125** (–.091**) –.079 (–.059) .10** (.087**) .080 (.048)
n 364 364 364 364 364

Note. We report Spearman correlation coefficients and Kendall’s Tau coefficients (in parentheses) between participants’ level of extraversion (Panel A) and neurot-
icism (Panel B) and the variables ascertained with the help of the experimental asset market. N denotes the number of individuals. The symbols , , and 
denote statistical significance at the 1%, 5%, and 10% levels, respectively. Example: The Spearman correlation coefficient between the participants’ level of
q
extraversion (EXTRAVERTi) and the average price paid for purchases adjusted by the remaining expected dividend payments, PiAdjV , is .094 with statistical signifi-
cance at the 10% level.

of extraversion and their purchase prices. Positive and Table 5. With respect to Hypothesis 1, we find no signifi-
statistically significant correlations between EXTRA- cant influence of EXTRAVERTi on the number of risky
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VERTi and QPrem Prem

iAdjV and QiAdjP support Hypothesis 3 on a
positive relationship between individuals’ degree of
extraversion, and the number of assets bought when
assets are overpriced. At the 5% level, NEUROTi is nega-
tively correlated with Ai which supports Hypothesis 4
that higher degrees in neuroticism lead to a lower num-
ber of risky assets in the financial portfolio. Results
regarding Hypothesis 5 are less clear cut. The negative
s
correlation between NEUROTi and PiAdjV is statistically
significant at the 5% level, whereas the negative correla-
s
tion between NEUROTi and PiAdjP is insignificant. NEU-
ROTi is positively correlated with SDisc
iAdjV at the 5% level
which supports Hypothesis 6 on the positive relationship
between individuals’ degree of neuroticism and the num-
ber of sales of underpriced assets. However, the positive
correlation between NEUROTi and SDisc iAdjP is insignificant.
Regression analysis
We report results for the regression analysis with the
number of risky assets held, Ai , as dependent variable in
assets in a financial portfolio. GENDERi appears to be
the only variable that exerts statistically significant influ-
ence on Ai in the sense that men hold more risky assets
than women do.
In Table 6, we report results of the regression analysis
regarding the impact of extraversion on prices paid for
purchases. Panels A and B contain the results for the
q q
regressions with PiAdjV and PiAdjP as dependent variable,
respectively. Supporting Hypothesis 2, we find a positive
q q
impact of EXTRAVERTi on PiAdjV as well as on PiAdjP , the
first effect, however, being statistically insignificant.
These results indicate that higher extraverted individuals
pay higher prices for their asset purchases. The impact of
EXTRAVERTi gets smaller and less statistically signifi-
cant when we include GENDERi as independent variable.
The full regression model, however, reveals a significant
impact of extraversion even after accounting for
gender effects. In addition, POSAFFECTi has a negative
influence on prices paid for purchases, which is signifi-
cant at least at the 10% level.
Table 7 contains the results of the regression analysis
regarding the impact of extraversion on the number of

Table 5. Influence of extraversion on number of assets held.

Dependent variable: Ai (i.e., average number of assets held by individual i during the experiment adjusted for the number of outstanding assets in the respec-
tive market)

b0 .052*** .044*** .0451*** .0477*** .052*** .052*** .038**

EXTRAVERTi –.002 –.000 –.001 –.002 –.002 –.002 –.001
GENDERi .010*** .010***
INTLOCUSi .001 –.001
EXTLOCUSi .002 .003
POSAFFECTi .003* .003
NEGAFFECTi –.002 –.002
AGEi –.000 –.000
PAYMENTi .004 .004
***
Likelihood ratio chi-square .85 11.49 1.45 3.97 1.10 1.92 17.14**

Note. We provide regression coefficients and likelihood ratio chi-square for the regression analysis using Equation 6 with the number of assets held, Ai , as depen-
dent variable. Due to nonnegativity of the dependent variable we apply Tobit regressions. In a stepwise approach we combine EXTRAVERTi with the further
explanatory variables separately. The last column includes the results for the full regression model. The symbols , , and  denote statistical significance at
the 1%, 5%, and 10% levels, respectively. Example: Regressing Ai on participants’ level of extraversion (EXTRAVERTi) as sole independent variable yields a coeffi-
cient of –.002 with no statistical significance.
 12 A. OEHLER ET AL.

Table 6. Influence of extraversion on purchase price.

q
Panel A: Dependent variable: PiAdjV (i.e., average price paid by individual i for purchases during the experiment adjusted by remaining expected dividend pay-
ments)

b0 .449*** .700*** .440 .729*** .403 .483*** .537

EXTRAVERTi .059 .025 .056 .088* .059 .069 .043
GENDERi –.282*** –.298***
INTLOCUSi .011 .072
EXTLOCUSi .012 –.019
POSAFFECTi –.118** –.106**
NEGAFFECTi –.001 .009
AGEi .002 .020
PAYMENTi –.317*** –.340***
R2 (adj.) .002 .034 –.003 .013 –.001 .031 .070
q
Panel B: Dependent variable: PiAdjP , (i.e., average price paid by individual i for purchases during the experiment adjusted by mean transaction price)

b0 –.148*** –.040 –.103 –.065 –.165 –.145*** –.098

EXTRAVERTi .034** .020 .041*** .043*** .034** .035** .030*
GENDERi –.121*** –.120***
INTLOCUSi –.025 –.012
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EXTLOCUSi .017 .012

POSAFFECTi –.035** –.029*
NEGAFFECTi .000 .000
AGEi .001 .007
PAYMENTi –.028 –.034
R2 (adj.) .012 .070 .012 .020 .009 .012 .070

Note. We provide regression coefficients and adjusted R2 for the regression analysis using Equation 6 with the average purchase price as dependent variable.
q
Panel A displays results for the average purchase price paid by individual i adjusted by remaining expected dividend payments, PiAdjV , as dependent variable
q
and Panel B for the average purchase price paid by individual i adjusted by mean transaction price, PiAdjP , as dependent variable. In a stepwise approach we
combine EXTRAVERTi with the further explanatory variables separately. The last column includes the results for the full regression model. The symbols , ,
and  denote statistical significance at the 1%, 5%, and 10% levels, respectively. Example: Regressing PiAdjV on participants’ level of extraversion (EXTRAVERTi) as
q

sole independent variable yields a coefficient of .059 with no statistical significance.

Table 7. Influence of extraversion on number of purchases.

Panel A: Dependent variable: QPrem

iAdjV (i.e., number of purchases by individual i when assets trade above the price justified by remaining expected dividend pay-
ments)

b0 .085*** .0104*** .130*** .061** .085*** .083*** .129***

EXTRAVERTi .009* .006 .010* .009* .009*** .008* .006
GENDERi –.022*** –.023***
INTLOCUSi –.008 –.008
EXTLOCUSi –.007 –.011
POSAFFECTi .002 .003
NEGAFFECTi .012* .014**
AGEi .000 –.000
PAYMENTi .016 .016*
Likelihood ratio chi-square 3.39* 10.21*** 4.84 6.95* 3.48 6.04** 19.5**
Panel B: Dependent variable: QPrem
iAdjP (i.e., number of purchases by individual i when assets trade above mean transaction price)

b0 .038*** .064*** .057* .039** .038*** .037*** 0.77**

EXTRAVERTi .008** .005 .010** .010*** .008** .008** .007*
GENDERi –.029*** –.029***
INTLOCUSi –.007 –.005
EXTLOCUSi .003 –.001
POSAFFECTi –.006 –.005
NEGAFFECTi .008 .009*
AGEi .000 –.000
PAYMENTi .007 .007
** *** ** **
Likelihood ratio chi-square 4.77 26.23 6.54 9.34 4.87* 5.67* 32.46*****

Note. We provide regression coefficients and likelihood ratio chi-square for the regression analysis using Equation 6 with number of purchases of overpriced assets
as dependent variable. Panel A displays results for the number of purchases by individual i when assets trade above the price justified by remaining expected
dividend payments, QPrem
iAdjV , as dependent variable and Panel B for the number of purchases by individual i when assets trade above mean transaction price,
iAdjP , as dependent variable. Due to nonnegativity of the dependent variable we apply Tobit regressions. In a stepwise approach we combine EXTRAVERTi
QPrem
with the further explanatory variables separately. The last column includes the results for the full regression model. The symbols , , and  denote statistical
significance at the 1%, 5%, and 10% levels, respectively. Example: Regressing QPrem iAdjV on participants’ level of extraversion (EXTRAVERTi) as sole independent
variable yields a coefficient of .009 with a statistical significance at the 10% level.
 JOURNAL OF BEHAVIORAL FINANCE 13

purchases of overpriced assets. The positive coefficients
for EXTRAVERTi in Panel A reveal that more extra-
verted individuals purchase more financial assets when
assets are overpriced. However, statistical significance in
Panel A is considerably weaker than in Panel B. The pos-
itive coefficients for EXTRAVERTi in Panel B are statisti-
cally significant at least at the 10% level in most of the
specifications which supports Hypothesis 3. Again, most
of EXTRAVERTi’s positive influence is covered by GEN-
DERi. Nevertheless, EXTRAVERTi and NEGAFFECTi
have a statistically significant influence on QPrem iAdjP even
beyond GENDERi.
Table 8 shows the results of the regression analysis
with Ai as dependent variable and NEUROTi as indepen-
dent variable. The negative coefficient for NEUROTi is
statistically significant in all specifications at least at the
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specifications in Panel A (impact on SDisciAdjV ), which would
support Hypothesis 6, the findings are not convincing in
particular due to an insignificant coefficient in the full
regression model. However, we find a negative and statisti-
cally significant impact of INTLOCUSi on the number of
sales below the price justified by remaining expected divi-
dend payments. Again, the coefficient for GENDERi is sig-
nificant at the 1% level.
In all regression models GENDERi seems to have
the strongest explanatory power. We find statistically
s
significant positive impact of GENDERi on Ai , PiAdjV
s
and PiAdjP . This indicates that men hold more risky
assets in their financial portfolios and sell their risky
assets at higher prices than women do. The statistically
q
significant negative influence of GENDERi on PiAdjV and
q
PiAdjP indicates that men buy risky assets at lower prices.

10% level, which supports Hypothesis 4 meaning that
more neurotic individuals hold a smaller number of
assets. This influence stays significant, even after includ-
ing GENDERi as explanatory variable. The coefficients
for all other variables are statistically insignificant.
The results in Table 9 do not indicate a clear-cut
impact of neuroticism on the prices at which individuals
sell assets. We find statistical significance of the coeffi-
s
cient for the impact of NEUROTi on PiAdjV (Panel A) in
most specifications, but not in the full regression model.
Furthermore, we mostly find insignificant negative
s
influence of NEUROTi on PiAdjP in Panel B. Although the
tendency of the negative influence is in line with
Hypothesis 5, support for this hypothesis is weak.
According to the results in Table 10, neuroticism is not
a significant factor regarding the number of sales when
assets trade below the price justified by remaining
expected dividend payments (Panel A) or mean transac-
tion price (Panel B). Although we get a statistically signifi-
cant and positive coefficient for NEUROTi for some
When assets are overpriced, men make fewer purchases
than women do and they sell fewer assets than women
do when assets are underpriced.16 Different behavior of
men compared with women is in line with findings for
financial asset markets with respect to, for example,
trading (e.g., Barber and Odean [2001]) and riskiness of
investments (e.g., Jianakoplos and Bernasek [1998],
Hariharan et al. [2000], Mayfield et al. [2008]). Further-
more, Eckel and F€ ullbrunn [2015] showed for experi-
mental financial asset markets that men produce
greater price bubbles than women do.
We find a negative relationship between AGEi and
s
PiAdjP in the sense that older individuals tend to sell their
assets at lower prices. This might be interpreted as older
individuals’ preference for less risky portfolios (in line
with Barber and Odean [2001], Dorn and Huberman
[2005]), because they accept lower prices to sell risky
assets as early as possible. Overall, however, we do
not find a consistent impact of age on our dependent
variables.

Table 8. Influence of neuroticism on number of assets held.

Dependent variable: Ai (i.e., average number of assets held by individual i during the experiment adjusted for the number of outstanding assets in the
respective market)

b0 .059*** .051*** 0.60*** .052*** .059*** .058*** .049***

NEUROTi –.004** –.003* –.005*** –.004** –.004*** –.004** –.003*
GENDERi .009*** .009***
INTLOCUSi –.002 –.003
EXTLOCUSi .004 .004
POSAFFECTi .002 .002
NEGAFFECTi –.000 –.002
AGEi –.000 –.000
PAYMENTi .003 .004
Likelihood ratio chi-square 6.37** 14.28*** 8.90** 7.50* 6.87** 7.22** 20.15***

Note. We provide regression coefficients and likelihood ratio chi-square for the regression analysis using Equation 7 with the number of assets held, Ai , as depen-
dent variable. Due to nonnegativity of the dependent variable we apply Tobit regressions. In a stepwise approach we combine NEUROTi with the further explan-
atory variables separately. The last column includes the results for the full regression model. The symbols , , and  denote statistical significance at the 1%,
5%, and 10% levels, respectively. Example: Regressing Ai on participants’ level of neuroticism (NEUROTi) as sole independent variable yields a coefficient of
–.004 with a statistical significance at the 5% level.
 14 A. OEHLER ET AL.

Table 9. Influence of neuroticism on sale price.

s
Panel A: Dependent variable: PiAdjV (i.e., average price received by individual i for purchases during the experiment adjusted by remaining expected dividend
payments)

b0 1.044*** .842*** 1.047*** 1.206*** 1.627*** 1.130*** 1.314**

NEUROTi –.102** –.068 –.088* –.109** –.112** –.107** –.066
GENDERi .231*** .231***
INTLOCUSi .028 .097
EXTLOCUSi –.074 –.062
POSAFFECTi –.050 –.051
NEGAFFECTi .014 .014
AGEi –.025 –.024
PAYMENTi –.337*** –.329***
R2 (adj.) .012 .039 .011 .010 .016 .048 .071
s
Panel B: Dependent variable: PiAdjP (i.e., average price received by individual i for sales during the experiment adjusted by mean transaction price)

b0 .082* .001 .070 .069 .371** .085** .227

NEUROTi –.021 –.007 –.017 –.021 –.025* –.021 –.007
GENDERi .092*** .101***
INTLOCUSi .008 .021
–.015 –.012
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EXTLOCUSi
POSAFFECTi –.002 –.001
NEGAFFECTi .007 .007
AGEi –.012** –.015**
PAYMENTi –.015 –.012
R2 (adj.) .003 .035 –.001 –.002 .013 .001 .042

Note. We provide regression coefficients and adjusted R2 for the regression analysis using Equation 7 with the average sale price received as dependent variable.
s
Panel A displays results for the average price received by individual i adjusted by remaining expected dividend payments, PiAdjV , as dependent variable and
s
Panel B for the average price received by individual i for sales adjusted by mean transaction price, PiAdjP , as dependent variable. In a stepwise approach we com-
bine NEUROTi with the further explanatory variables separately. The last column includes the results for the full regression model. The symbols **, , and  and
 s
denote statistical significance at the 1%, 5%, and 10% levels, respectively. Example: Regressing PiAdjV on participants’ level of neuroticism (NEUROTi) as sole
independent variable yields a coefficient of –.102 with statistical significance at the 5% level.

The results for the dummy variable PAYMENTi, up fee, hardly reveal a statistically significant influence of
which is assigned a value of 1 when participants receive a the type of payment on individuals’ behavior in the
variable payment and zero if they receive a fixed show- experimental asset market. However, the negative and

Table 10. Influence of neuroticism on number of sales.

Panel A: Dependent variable: SDisc

iAdjV (i.e., number of sales by individual i when assets trade below the price justified by remaining expected dividend payments)

b0 .012 .031*** .060** .007 .012 .012 .078***

NEUROTi .007** .003 .006* .006** .007** .006** .001
GENDERi –.022*** –.023***
INTLOCUSi –.010** –.011**
EXTLOCUSi –.002 –.003
POSAFFECTi .000 .002
NEGAFFECTi .004 .006
AGEi .000 –.000
PAYMENTi –.000 –.001
Likelihood ratio chi-square 4.94** 22.77*** 8.84** 6.14 4.98* 4.95* 30.63***
Panel B: Dependent variable: SDisc
iAdjP (i.e., number of sales by individual i when assets trade below mean transaction price)

b0 .053*** .076*** .087*** .051*** .053*** .054*** .110***

NEUROTi .004 .000 .004 .003 .004 .004 –.001
GENDERi –.026*** –.028***
INTLOCUSi –.006 –.007
EXTLOCUSi -–.003 –.004
POSAFFECTi –.001 –.001
NEGAFFECTi .006 .008*
AGEi .000 –.000
PAYMENTi –.003 –.004
Likelihood ratio cci-square 1.52 20.74*** 2.86 3.18 1.57 1.70 26.40***

Note. We provide regression coefficients and likelihood ratio chi-square for the regression analysis using Equation 7 with number of sales as dependent variable.
Panel A displays results for the number of sales by individual i when assets trade below the price justified by remaining expected dividend payments, SDisc iAdjV , as
dependent variable and Panel B for the number of sales by individual i when assets trade below mean transaction price, SDisc iAdjP , as dependent variable. Due to
iAdjP and SiAdjV we use the Tobit methodology. In a stepwise approach we combine NEUROTi with the further explana-
nonnegativity of our dependent variables SDisc Disc

tory variables separately. The last column includes the results for the full regression model. The symbols , , and  denote statistical significance at the 1%,
5%, and 10% levels, respectively. Example: Regressing SDisc iAdjV on participants’ level of neuroticism (NEUROTi) as sole independent variable yields a coefficient of
.007 with statistical significance at the 5% level.
 JOURNAL OF BEHAVIORAL FINANCE 15

highly statistically significant coefficients of PAYMENTi
q s
with respect to PiAdjV and PiAdjV , this means for the influ-
ence on prices relative to the remaining expected dividend
payments, indicate that individuals with a variable com-
pensation pay lower prices for purchases and accept lower
prices for sales than individuals with fixed compensation
do. Because the average price level is above the price justi-
fied by remaining expected dividend payments, we inter-
pret these results in the sense that a payment scheme that
includes at least some financial incentive can influence
individuals to trade at prices that are closer to the price
justified by remaining expected dividend payments. The
form of the payment, however, does not appear to inter-
fere with the impact of extraversion or neuroticism.
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est values in extraversion which is in line with
Hypothesis 2. Furthermore, highly extraverted individu-
als make more purchases when assets are overpriced
than individuals with the lowest values in extraversion
do. Therefore, the results also support Hypothesis 3.
Panel B displays results for the subsamples regarding
neuroticism. We find that the mean and median values
s s
of Ai , PiAdjV and PiAdjP in the top subsample are lower than
in the bottom subsample, the difference being statisti-
cally significant at least at the 10% level, which supports
Hypotheses 4 and 5. Individuals with the highest values
in neuroticism hold fewer assets in their financial portfo-
lios and they sell their assets for lower prices than indi-
viduals with the lowest values do. With respect to
Hypothesis 6, which states that individuals with higher
values in neuroticism sell more underpriced assets than

Robustness check
As robustness check and in addition to the full sample
analysis, we compare the asset market figures between
the top and bottom quintiles of individuals according to
extraversion and neuroticism. Table 11 reports respective
results for pairwise tests of equality of the asset market
variables according to extraversion (Panel A) and neu-
roticism (Panel B). With respect to the average number
of the assets in the financial portfolio we find no statisti-
cally significant difference between the extraversion sub-
q q
samples. The mean and median values of PiAdjV , PiAdjP ,
QPrem Prem
iAdjV and QiAdjP in the top extraversion quintile are
higher than in the bottom quintile. These differences are
statistically significant at least at the 5% level. The results
indicate that individuals with the highest values in extra-
version pay higher prices than individuals with the low-
individuals with lower values do, we find further support,
because the mean and median values of SDisc Disc
iAdjV and SiAdjP in
the top quintile are higher than in the bottom quintile at
statistically significant levels.
Discussion and conclusion
Our analysis is, to our knowledge, the first that estab-
lishes a link between the large strands of research on per-
sonality in social psychology and on experimental asset
markets. More specifically, we examine how individuals’
degree of extraversion and neuroticism influences their
investment behavior. Therefore, we analyze a unique
dataset including data on 364 individuals’ degree of
extraversion and neuroticism and their decisions in an
experimental asset market.

Table 11. Pairwise test of equality between top and bottom quintiles of extraversion and neuroticism.
Top Bottom

Mean Med Mean Med Significance U test

Panel A: Extraversion
Ai .042 .038 .048 .045
q **
PiAdjV .754 .646 .515 .467
q
PiAdjP .046 .053 –.069 –.035 ***

QPrem
iAdjV .127 .115 .103 .086 **

QPrem
iAdjP .077 .069 .058 .046 **

Panel B: Neuroticism
**
Ai .041 .038 .055 .049
s ***
PiAdjV .558 .463 .948 .790
s
PiAdjP –.028 –.016 .043 .056 *

SDisc
iAdjV .048 .031 .029 .015 ***

SDisc
iAdjP .079 .062 .061 .046 **

Note. We report mean (Mean) and median (Med) values of the experimental asset market variables for the top and bottom quintiles with respect to participants’
level of extraversion (Panel A) and neuroticism (Panel B). In addition, we provide results of the U-test as test of equality between the top and bottom quintiles.
The symbols , , and  denote statistical significance at the 1%, 5%, and 10% levels, respectively. Example: The mean value of the participants’ average
number of assets held by individual i adjusted for the number of outstanding assets Ai is .042 in the top quintile of extraverted participants and .048 in the bot-
tom quintile of extraverted individuals. The subsamples do not differ from each other regarding Ai at statistically significant levels.
 16 A. OEHLER ET AL.
We find evidence that more extraverted individuals
tend to pay higher prices for risky assets and make
more purchases when these assets are overpriced than
less extraverted individuals do. We attribute the
observed behavior to higher risk propensity of more
extraverted individuals. Hence, our results are consis-
tent with Nicholson et al. [2005], Durand, Newby
and Sanghani [2008], Mayfield et al. [2008], Becker
et al. [2012], and Pan and Statman [2013]. In addi-
tion, we find that more neurotic individuals hold
fewer risky assets in their portfolio than less neurotic
individuals do, which is contrary to the findings of
Durand, Newby and Sanghani [2008] and Durand,
Newby, Peggs, et al. [2013], but is in line with Clo-
ninger [2000], Nicholson et al. [2005], Mayfield et al.
[2008], Lommen et al. [2010], Becker et al. [2012],
Downloaded by [Purdue University Libraries] at 15:45 26 September 2017
and Niszczota [2014]. Furthermore, results indicate
that more neurotic individuals sell financial assets at
lower prices and make more sales when financial
assets are underpriced. Additionally, our results sup-
port the findings of, for example, Eckel and F€ ullbrunn
[2015], Mayfield et al. [2008], and Barber and Odean
[2001] that men behave basically different regarding
investment decisions than women do.
We chose an experimental asset market setting because
it allows us to diminish the influence of external effects
such as heterogeneous information. Future researchers
should address external effects that are obvious in real
financial markets and analyze the impact of personality
traits in the presence of, for example, information over-
load or interfering financial decisions of other investors
(e.g., Brown, Ivkovic, Smith, and Weisbenner [2008]). In
addition, future researchers may include a further and
more developed analysis of the relationship between gen-
der, personality, and financial decision making. Beyond
this, research on, for example, bubbles in financial markets
could benefit from including personality of market partici-
pants—both at the individual and the aggregate market
levels—as a crucial explanatory factor.
Notes
1. See Palan [2013] for a literature review of impact factors
on bubbles in experimental asset markets.
2. One exemption is Durand, Newby, Tant, and Trepongkar-
una [2013], who employed an interactive-simulated for-
eign exchange market that is similar to the mechanism of
an experimental asset market.
3. The 5 personality traits include conscientiousness, extraver-
sion, agreeableness, neuroticism, and openness to experience.
4. Early on, personality scientist used these 5 factors (e.g.,
Fiske [1949], Tupes and Christal [1961], Norman [1963]);
however, Goldberg [1981, 1993] made the term Big Five
popular.
5 See, for example, Rotter [1954, 1966] for early research on
the concept of locus of control. See also Oehler [1995] and
the literature cited therein for the explanations of illusion
of control and locus of control.
6. See, for example, Glaser and Weber [2007] or Moore and
Healy [2008] for an overview of different manifestations
of overconfidence.
7. Durand et al. [2008] deviated from the typically used
nomenclature and employed the term negative emotion
instead of neuroticism.
8. Vianello, Schnabel, Sriram, and Nosek [2013] found simi-
lar results regarding the impact of gender.
9. At this stage, we do not further differentiate between over-
pricing as deviation from expected dividend payments and
overpricing as deviation from market-wide expectations
about price developments. Please see the methodology
section for our approach to deal with different definitions
of overpriced assets.
10. Please see the Methodology section for our approach to
deal with different definitions of underpriced assets.
11. Rammstedt and John [2007] found correlations between
the items of the BFI-10 and the full BFI of up to 0.89 for
extraversion and 0.86 for neuroticism.
12. Specifically, we choose 6 items from the original 20 items
to measure positive and negative affect. To measure posi-
tive affect, we choose the 3 items active, interested, and
determined. To measure negative affect, we choose the 3
items distressed, nervous, and jittery.
13. If individuals do not trade at all during the experiment,
the interest on the cash held during the 15 trading periods
would result in an additional payment of €0.05. To sim-
plify payment procedure, we round payable amounts on
half/full Euros.
14. Similar to Rammstedt et al. [2012] we recode the reversed
items in the questionnaire to calculate the median value of
EXTRAVERTi and NEUROTi, respectively.
15. Because the participants receive a riskless interest pay-
ment on cash holdings of 1 per mill for each trading
period, we additionally use the discounted value of the
expected dividend payments as approximation for the
assets’ fundamental value. This procedure, however, does
not significantly alter our results; we therefore do not sep-
arately report the results based on the discounted value of
the expected dividend payments.
16. This behavior results in a higher portfolio value after the
last trading period for men (mean: 5,657 units of experi-
mental currency; median: 5,737) than for women (mean:
4,005; median: 4,368).
Acknowledgments
The authors would like to thank Benjamin Hartl, Tim A.
Herberger, Martin Abrahamson (discussant), Deborah
Trask (Managing Editor), an anonymous referee, partici-
pants of the 52nd Annual Meeting of the Eastern Finance
Association, the 2016 Behavioural Finance Working Group
Conference, and seminar participants at Bamberg Univer-
sity (Germany) for helpful comments and suggestions.
They further thank Sebastian Hilker and Robert Stein for
technical support. All remaining errors are the authors’
own.

ORCID
Florian Wedlich http://orcid.org/0000-0001-9867-8319
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