RELATIONSHIP BETWEEN FRAMING BIAS AND BIG FIVE PERSONALITY TRAITS OF INDIVIDUAL INVESTERS

Returns depend upon decisions of investors, but investors biases challenge the ability to take rationaldecisions. Study of biases and their relationships with personality traits helps to understand how biasesoriginate, the way in which they possibly effect investors, and which personality types could be moresusceptible to them. There are evidences that biases have relationships with personality traits of investorsand this study focuses on one such relationship between framing bias and personality traits. Given thequalitative nature of variables under study, the relationship was established by statistically significantcoefficients of logistic regression equation, where bias-variable was dependent and big five personalitytraits were independent. The score of personality trait, which had significant relationship, was crosstabulated with bias variable, the chi square test indicated a statistically significant relationship. Theresults lead to conclusion that an investor with higher score of agreeableness has higher probability ofhaving framing bias. It is also discussed that an agreeable person may demonstrate irrationality discussedin prospect theory, more as compared to others, as the framing effects were measured using gain and lossframes. Since the study deals with frames of communication, it indicates towards the effects ofpersonality traits on communication between portfolio manager and clients. The study contributes forportfolio managers that an agreeable client may not actually agree for rational decision if thecommunication is not in right frame.