PERSONALITY TRAITS AND FINANCIAL RISK TOLERANCE: THE MEDIATING ROLE OF INVESTMENT EXPERIENCE AMONG INDIAN INVESTORS

DOI: https://doie.org/10.65985/APER.2026147599

Authors:

Binny Kumar, Jyotsna Sharma, Vipul Chalotra

Keywords:

Personality traits; Financial risk tolerance; Investment experience; Behavioural finance; Indian investors

Abstract:

This study examines the relationship between personality traits and financial risk tolerance among Indian individual investors, with particular emphasis on the mediating role of investment experience. Grounded in behavioural finance theory and the Five-Factor Model of personality, the study seeks to understand how psychological characteristics shape investors’ willingness to undertake financial risk in an emerging market context. Primary data were collected through a cross-sectional survey of 380 Indian retail investors using a structured questionnaire. Personality traits were measured using the Big Five Personality Inventory, while financial risk tolerance was assessed using a standardized Financial Risk Tolerance Scale. Investment experience was incorporated as a mediating variable. The data were analyzed using correlation analysis and Structural Equation Modelling (SEM) to examine both direct and indirect relationships among the constructs. The findings reveal that extraversion and openness to experience have a significant positive influence on financial risk tolerance, whereas neuroticism exhibits a significant negative relationship. Conscientiousness and agreeableness show weaker and statistically insignificant direct effects. Importantly, investment experience partially mediates the relationship between personality traits and financial risk tolerance, indicating that experiential learning enhances investors’ ability to manage financial risk. The study offers important implications for behavioural finance literature, investor profiling, and financial advisory practices. By providing empirical evidence from the Indian market, the findings contribute to a deeper understanding of how psychological traits and investment experience jointly influence financial risk-taking behaviour in emerging economies.

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