The Trust Risk Puzzle: The Impact of Trust on the Willingness to Take Financial Risk

Andreas Oehler, Matthias Horn and Stefan Wendt
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Andreas Oehler: Chair of Finance, Bamberg University, Bamberg, Kaerntenstrasse 7, 96045 Bamberg, Germany
Matthias Horn: Chair of Finance, Bamberg University, Bamberg, Kaerntenstrasse 7, 96045 Bamberg, Germany
Stefan Wendt: Department of Business, Bifröst University, Bifröst, 311, Iceland

Quarterly Journal of Finance (QJF), 2023, vol. 13, issue 03, 1-32

Abstract: We provide a structural equation model to analyze the influence of both willingness to trust others and personality factors such as the Big Five characteristics and optimism on retail investors’ risky assets share and general willingness to take risks. The main findings are as follows: The personality trait agreeableness has a significant and positive impact on general willingness to trust. Willingness to trust others has a significant negative influence on the willingness to take financial risk. More neurotic and more conscientious individuals are significantly more risk averse. Furthermore, more optimistic people reveal a significant lower degree of risk aversion.

Keywords: Trust; risk; investments; personality factors; optimism (search for similar items in EconPapers)
JEL-codes: D14 D81 D91 G11 G41 G51 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S2010139223500064

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