Does Personality Predict Behavioural Biases? Evidence from Indian Stock Market

Abstract: The study aims to examine the impact of big five personality traits on tendency of investors to exhibit behavioural biases namely overconfidence and herding. Using cross sectional research design, data collected from 490 Indian individual investors were analysed using PLS-SEM. The findings highlighted that personality traits affect behavioural biases leading to irrational investment decisions. Extraversion and agreeableness were positively related to overconfidence whereas neuroticism was negatively associated. Herd behaviour was influenced by openness and neuroticism. The results suggest that understanding the personality differences and investors’ psychology can assist financial managers and investment consultants in customizing the investment products and solutions to better suit the requirements of investors. Keywords: Behavioural Biases, Herding, Overconfidence, Partial Least Square, Personality JEL Classification Number: D91, G40, G4