Locus of Control and Investment in Risky Assets

Nicolas Salamanca, Andries de Grip, Didier Fouarge and Raymond Montizaan

No 10407, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We show that household heads with a strong internal economic locus of control are more likely to hold equity and hold a larger share of equity in their investment portfolio. This relation holds when we control for economic preferences and possible confounders such as financial literacy, overconfidence, optimism, trust, and other personality traits. We argue that this relation is driven by a link between internal economic locus of control and a lower perception of the risk of investing inequity. Those with a strong internal economic locus of control perceive less variance in equity, making these investments more attractive.

Keywords: risk and time preferences; personality traits; household portfolios; risk perception (search for similar items in EconPapers)
JEL-codes: D14 D19 G11 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2016-12
New Economics Papers: this item is included in nep-cbe and nep-neu
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published - revised version published in: Journal of Economic Behavior & Organization, 2020, 177, 548-568

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Related works:
Journal Article: Locus of control and investment in risky assets (2020)
Working Paper: Locus of control and investment in risky assets (2013)
Working Paper: Locus of control and investment in risky assets (2013)
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