Locus of control and investment in risky assets

Nicolas Salamanca Acosta, A. de Grip, Didier Fouarge, Raymond Montizaan

Research output: Book/ReportReport

Abstract

We show that household heads with a strong internal economic locus of control are more likely to hold equity and hold a larger share of equity in their investment portfolio. This relation holds when we control for economic preferences and possible confounders such as financial literacy, overconfidence, optimism, trust, and other personality traits. We argue that this relation is driven by a link between internal economic locus of control and a lower perception of the risk of investing inequity. Those with a strong internal economic locus of control perceive less variance in equity, making these investments more attractive.
Original languageEnglish
Place of PublicationBonn
PublisherIZA
Number of pages49
Publication statusPublished - 2016

Publication series

SeriesIZA Discussion Paper Series
Number10407

JEL classifications

  • g11 - "Portfolio Choice; Investment Decisions"
  • d14 - Personal Finance
  • d19 - Household Behavior and Family Economics: Other

Keywords

  • household portfolios
  • personality traits
  • risk and time preferences
  • risk perception

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