What determines your attitude to risk? Of course, we like to think that it depends upon a rational assessment of the outlook for companies and markets. New research, however, shows that this is only part of the story. Chris Brooks and Louis Williams show that our personalities also shape our willingness to take risk.
In a study of over 600 UK investors, they show that extroverts tend to take more risk than introverts. This corroborates research by economists at the University of Sheffield, who have found that people who spend more time with friends or at sports clubs or churches are more likely to own equities than others. This could be because an active social life gives us comfort in hard times and hence more ability to cope with losses: Professors Brooks and Williams also show that mental resilience is associated with greater risk-taking.
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