The big five personality traits and psychological biases: an exploratory study

This study examines the relationship between behavioral biases (herd behavior bias, overconfidence bias, and loss aversion bias) and the Big Five Personality traits. An exploratory study is devised to explore the links between biases and personality. The study develops a structured test battery to measure the biases. The items measuring overconfidence, loss aversion, and herd behavior bias was conceptualized and validated in the study. The test battery was sent out to 294 investors, and with a response percentage of 68%, 200 respondents returned the survey. The study employed confirmatory factor analysis (CFA) to validate the psychological biases questionnaire and employed structural equation modeling for path analysis. Two of the big five personality traits, i.e., Extraversion and Openness to experience, reported a significant causal relationship with all three biases.