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Information sources and trading behavior: does investor personality matter?

Muhammad Zubair Tauni (School of Accounting, Dongbei University of Finance and Economics, Dalian, China)
Hong Xing Fang (School of Accounting, Dongbei University of Finance and Economics, Dalian, China)
Amjad Iqbal (School of Accounting, Dongbei University of Finance and Economics, Dalian, China)

Qualitative Research in Financial Markets

ISSN: 1755-4179

Article publication date: 3 May 2016

Abstract

Purpose

This paper aims to investigate the impact of sources of information on trading behavior by analyzing the influence of investor personality in Chinese futures market.

Design/methodology/approach

The authors adopted the Big Five personality framework and examined the survey results of individual investors (n = 333) in Chinese futures market. Personality traits of futures investors were measured by the NEO-Five Factor Inventory (Costa and McCrae, 1989) which is a shortened version of revised NEO personality inventory of the Big Five model (Costa and McCrae, 1992). Confirmatory factor analysis was conducted to assess the fitness of model. Structural equation modeling was used to evaluate the moderating influence of investor personality traits on the association between source of information and trading behavior.

Findings

The results confirm the previous findings that the sources of information used by investors as a foundation of their financial choices have a significant impact on trading frequency. The authors also provide an empirical evidence that investor personality traits moderate the relationship between sources of information and trading behavior. Financial advice from professionals is likely to increase trading frequency in investors with neuroticism and openness personality traits, and to reduce trading frequency in conscientious and extravert investors. Similarly, financial information acquired via word-of-mouth communication results in more trading in extravert and agreeable investors. Finally, information acquisition from specialized press causes more adjustment of conscientious investors’ portfolios. Theoretical explanations, implications and recommendations for future research are discussed.

Originality/value

This study combines information search and behavioral finance literature to demonstrate that the impact of various sources of market information on asset allocation decisions is influenced by investor personality. No previous study has been conducted yet to explain variations in the impact of sources of information on trading behavior by the Big Five personality traits and this paper seeks to fill this gap in Chinese futures market.

Keywords

Acknowledgements

The authors are very grateful to the anonymous reviewer and editor of the journal for their constructive comments. They also express deep gratitude to Prof Rong Hu and Prof Man Wang at Dongbei University of Finance and Economics, China, for their insightful suggestions. The authors are also grateful to Prof James Gaskin, Brigham Young University, USA, for his helpful lectures on Structural Equation Modeling and to Dr Rahat Ali Tauni, University of Bedfordshire, England, for his proofreading expertise. The normal disclaimer applies.

Citation

Tauni, M.Z., Fang, H.X. and Iqbal, A. (2016), "Information sources and trading behavior: does investor personality matter?", Qualitative Research in Financial Markets, Vol. 8 No. 2, pp. 94-117. https://doi.org/10.1108/QRFM-08-2015-0031

Publisher

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Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited