Personality Effects on Financial Responses Caused by the Perceived Financial Threat during the COVID-19 Pandemic

ABSTRACT

The link between the uncertainty of stock markets and the emotional stress of the COVID-19 pandemic has been studied by numerous researchers. For example, a few studies have provided mixed evidence about the behavioral responses of individual retail investors and their financial risk tolerance and stock trading. To the best of the authors' knowledge, however, this study is the first to analyze the influence of the psychological aspects of the pandemic on these investors' financial responses. A total of 396 investors from India participated in the study, and a mediational analysis was performed using AMOS to explore whether the perceived financial threat (PFT) was a linkage between personality traits (PTs), trading preferences, and risk tolerance during the pandemic. The results show that the PFT was a mediator between PTs and stock trading and between PTs and risk tolerance. Additionally, investors with various PTs had varying intensities of the PFT, which eventually impacted financial behavior in the form of trading and risk aversion. © 2022 Journal of Structured Finance. All right reserved.