Trader personality and trading performance: A framework and financial market experiment

A. van Witteloostuijn, K.S. Muehlfeld

    Research output: Working paperAcademic


    To date, the main source of inspiration for behavioral finance scholars has
    been cognitive psychology. Cognitive psychology offers a rich set of insights into
    human decision-making, and the biases that tend to influence it. Such biases
    provide important reasons as to why anomalies may characterize financial market
    behavior. This study builds on this tradition by merging in insights from yet
    another psychology sub-discipline: personality psychology. We argue that a human
    being’s personality is a key determinant of her behavior and performance. We
    illustrate, for a limited subset of six personality traits (locus of control, maximizing
    tendency, regret disposition, self-monitoring, sensation seeking and type-A/B
    behavior), how this logic can be applied in the context of the study of trader
    behavior and performance. We explore this line of reasoning in an illustrative asset
    market experiment, involving 34 economics students. The results suggest that
    different personality traits affect distinct components of trading behavior, and so
    trading performance. In particular, more relaxed types who are more susceptible
    to regret trade less frequently (a performance enhancing strategy). Impatient,
    urgency-driven types with low sensitivity for environmental cues tend towards the
    disadvantageous price-taker role (accepting limit orders posted by other traders)
    and exhibit a lower tendency towards exploiting arbitrage opportunities.
    Original languageEnglish
    Place of PublicationUtrecht
    PublisherUU USE Tjalling C. Koopmans Research Institute
    Number of pages44
    Publication statusPublished - 2008

    Publication series

    Name Discussion Paper Series / Tjalling C. Koopmans Research Institute
    ISSN (Electronic)2666-8238


    • Upper echelon theories
    • Personality traits
    • Financial market experiments
    • Trader behavior


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