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Locus of control and investment in risky assets

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

No 52, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)

Abstract: Using representative household panel data, we show that the investment behavior of households is related to the economic locus of control of household heads. A household's internal locus of control in economic issues is positively related to its decision to hold risky assets as well as its share of risky investments. We find evidence that these relations are due to a lower perception of the risk of investing in risky assets: Those who have an internal economic locus of control perceive less variance in risky assets, which makes these assets more attractive. The relation between investment in risky assets and locus of control cannot be explained by risk and time preferences or by personality traits such as optimism and the Big Five traits. Furthermore, the relation is independent of household socioeconomic background in terms of wealth or knowledge-- it holds for sophisticated and unsophisticated households alike.

Date: 2013-01-01
New Economics Papers: this item is included in nep-cfn and nep-neu
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Citations: View citations in EconPapers (17)

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Related works:
Journal Article: Locus of control and investment in risky assets (2020) Downloads
Working Paper: Locus of Control and Investment in Risky Assets (2016) Downloads
Working Paper: Locus of control and investment in risky assets (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:unm:umagsb:2013052

DOI: 10.26481/umagsb.2013052

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