Does Personality Traits & Gender Affect Loss Sensitivity? A Study of Retail Investors of Pakistan

Abstract

This study aims to investigate psychological and biological constructs of investors towards loss aversion. Big five personality model was used to measure psychological construct. Gender effect has been examined to measure biological construct of investors. Data was collected from 100 investors who directly invest at Pakistan stock exchange. After analyzing data collected from these investors it is observed that two personality traits i.e. neuroticism and Openness to Experience have no significant impact on myopic loss aversion while Conscientiousness, Extraversion and agreeableness have been observed to be more affected by loss aversion bias. Gender has been found to be susceptible towards loss aversion as males are more risk loving and less inclined towards loss aversion as compared to females. This study provides the clear understanding of prospects that how investors deviate from rationality while buying and selling of stocks and make biased decisions being influenced by their dispositions. It is also helpful in understanding the investing attitude of male and female investors toward losses and gains while choosing stocks for investment. The findings of this research could guide financial advisors in tailoring their advice based on investor personality and gender. These insights could potentially aid in developing targeted financial literacy programs. Additionally, it contributes to the broader field of behavioral finance by highlighting the intersection of psychological traits and financial decision-making.