The relevance of anger, anxiety, gender and race in investment decisions

Abstract

This study investigates the relative importance of trait anger and trait anxiety in financial decision-making. Given the disparate economic, cultural and social environments within an emerging market, this study focuses on South Africa to provide unique insights. The use of a student experimental cohort and hypothetical scenarios allows for the assessment of prima facie evidence of the merits of future research using more experienced participants and more realistic scenarios. Gender and race are incorporated as explanatory variables given the history of South Africa and the disparate opportunities amongst individuals of different races. Both variables are also notable indicators of financial behaviour and decision-making. A questionnaire was completed by 288 university students which measured Trait anxiety and Trait anger using the Anxiety Inventory and Anger Expression Inventory-2. Using multinomial logistic regressions, the results showed that White participants (rather than Black, Indian or mixed-race participants) and those individuals with higher levels of anger are more inclined to invest in equity. Alternatively, Women and individuals with higher levels of anxiety were found to be more risk averse. These findings are relevant to financial advisers as most of the predictive outcomes relate to risk which is vital in making investment decisions. While prior research has shown the relevance of personality traits on investment performance, the added dimension of gender and race adds practicality to the findings. It also highlights the necessity of including demographic variables when assessing personality traits.

Exploratory study: Financial behaviour of qualified financial professionals during South Africa’s lockdown

“…Although ample financial knowledge can enhance qualified financial professionals' financial behaviour, Baker et al (2020) mentioned that financial behaviour can still be influenced by challenging situations. Bernaola, Willows and West (2020:2) executed a study, which included finance students at a South African university (who were studying towards a professional qualification) as participants. The study investigated the relative importance of trait anger and trait anxiety in financial decision-making.…”

How do Australian female consumers exercise their decision-making power when making financial product decisions? The triad of financial market manipulation, rationality and emotions

“…As previously stated, anxiety is a key emotion classified as incidental emotion that has a negative impact on an individual's risk-taking abilities when making decisions (Maner et al, 2007;Bernaola et al, 2020;Peng et al, 2014). According to Shepperd et al (2005), anxiety causes an individual to feel uncertain about his or her own decisions and is caused by factors unrelated to the decision (Shepperd et al, 2005;Sanna, 1999), by an urge to perform better (Savitsky et al, 1998;Shepperd et al, 2005), by thinking about how circumstances could worsen (Sanna and Meier, 2000;Shepperd et al, 2005) and by thoughts of distress (Shepperd et al, 1996(Shepperd et al, , 2005.…”

“…As a result, individuals with higher levels of anxiety are thought to make decisions that are associated with low risk and low gain (Broman-Fulks et al, 2014;Maner et al, 2007;Bernaola et al, 2020). Furthermore, several studies have also demonstrated that individuals become anxious when making financial decisions and researchers have tended to classify this as financial anxiety, which occurs when people have negative feelings and a risk-averse attitude when making financial decisions (Bernaola et al, 2020;Zaleskiewicz and Traczyk, 2020). Specifically, studies pertaining to emotions and female financial decision-making reveal that females with higher levels of anxiety perform poorly when making financial decisions (Peng et al, 2014).…”

“…In addition, Gerrans and Hershey (2017) and Russell et al (2020) have found that, when faced with increasing complexity in financial product purchases, Australian female consumers experienced higher levels of anxiety. Moreover, Bernaola et al (2020) also discovered in their empirical research that females not only experience higher levels of anxiety when making financial decisions, but also have a risk-averse attitude when making these decisions. To validate these claims, Grable et al (2020) reported that anxiety moderates an individual's decision-making power and risk-taking abilities.…”

The Hesitation of Anxious Traders in an Agent-Based Model

“…In a similar vein, Weiss Wiesel et al [5] have found that anxiety attenuates on account of the increase in age. Furthermore, when agents participate in crucial and costly investments, they are also prone to anxiety (e.g., [6][7][8]). Furthermore, based on a survey involving 88,611 persons in Henan province, China, Li et al [9] have indicated that 12.01% of persons aged 18 to 30 are affected by anxiety.…”