Grit, Preferences, and Investor Behavior

William Bazley, Sima Jannati and George Korniotis

No 19513, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We examine whether grit affects the preferences and trading decisions of U.S investors. Grit is an important non-cognitive personality trait that is malleable and captures the sustained effort toward a goal despite setbacks. Using experiments formalized within prospect theory, we find that grit reduces loss aversion. Gritty investors are also more willing to exit losing investments and accumulate about 7% more wealth relative to control participants. Overall, our results suggest that grit affects the quality of investment decisions. Therefore, interventions cultivating grit could improve households' financial outcomes.

Keywords: Prospect theory; Loss aversion; Disposition effect; Personality traits (search for similar items in EconPapers)
JEL-codes: G11 G40 G41 (search for similar items in EconPapers)
Date: 2024-09
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