To read this content please select one of the options below:

Do investor’s Big Five personality traits influence the association between information acquisition and stock trading behavior?

Muhammad Zubair Tauni (School of Accounting, Dongbei University of Finance and Economics, Dalian, China)
Zia-ur-Rehman Rao (Institute of Business and Management, University of Engineering and Technology, Lahore, Pakistan)
Hongxing Fang (School of Accounting, Dongbei University of Finance and Economics, Dalian, China)
Sultan Sikandar Mirza (International Business School, Zhejiang Gongshang University, Hangzhou, China)
Zulfiqar Ali Memon (School of Accounting, Dongbei University of Finance and Economics, Dalian, China)
Khalil Jebran (Department of Management Studies, University of Malakand Pakistan, Chakdara, Pakistan)

China Finance Review International

ISSN: 2044-1398

Article publication date: 22 September 2017

Issue publication date: 11 October 2017

2469

Abstract

Purpose

The purpose of this paper is to investigate the impact of the frequency of information acquisition on the frequency of stock trading. The authors also examined if the Big Five personality traits of investor influence the association between information acquisition and stock trading behavior.

Design/methodology/approach

The authors adopted NEO Five-Factor Inventory (Costa and McCrae, 1989) inventory to measure the Big Five personality traits of investors and examined the data collected from 541 individual investors of the Chinese stock market. To overcome the potential endogeneity bias, the authors followed two-stage least square method for estimating endogenous covariate by employing instrumental variable analysis. The authors performed probit regression to evaluate the moderating influence of investor personality traits on the association between information acquisition and stock trading behavior. The authors also performed several other tests to check the robustness of the key findings.

Findings

This research confirmed the previous findings that the more frequently investors acquire information, the more often they trade in stocks. Moreover, the authors added to the existing literature by providing empirical evidence that the Big Five personality traits moderate the relationship of information acquisition with stock trading behavior. Information acquisition tends to increase stock trading frequency in investors with conscientiousness, extraversion and agreeableness traits. On the other hand, it also has the tendency to decrease the intensity of stock trading in investors with openness and neuroticism traits.

Research limitations/implications

The theoretical model in this study seeks to explain that the psychological factor, namely, investor personality, influences the way an investor interprets signals from information which in turn influences the investor decision to trade in securities. This research suggests that psychological characteristics of investors can be of relevance for policy makers in their attempts to improve their business in the financial services industry.

Originality/value

This study combines both information search literature and behavioral finance literature to investigate whether or not the information acquisition that relates to investors’ asset allocation decisions is influenced by investor personality. The study offers new theoretical insights into investors’ behavior due to the characteristics of the Chinese stock market which are uniquely different from other stock markets in the world. No previous study has been conducted so far in the Chinese stock market to explore variations in the impact of investors’ information acquisition on their stock trading by the Big Five personality and this paper strives to fill this research gap.

Keywords

Acknowledgements

The authors are very grateful to the editor and the anonymous reviewers for detailed and constructive comments to improve the paper. The authors are also thankful to the participants of the 9th China Financial Review International Conference 2016 held at Shanghai Jiaotong University for their helpful comments.

Citation

Tauni, M.Z., Rao, Z.-u., Fang, H., Mirza, S.S., Memon, Z.A. and Jebran, K. (2017), "Do investor’s Big Five personality traits influence the association between information acquisition and stock trading behavior?", China Finance Review International, Vol. 7 No. 4, pp. 450-477. https://doi.org/10.1108/CFRI-06-2016-0059

Publisher

:

Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

Related articles