Financial Decision Making and Individual Dispositions

Sekścińska K., Markiewicz Ł. (2020) Financial Decision Making and Individual Dispositions. In: Zaleskiewicz T., Traczyk J. (eds) Psychological Perspectives on Financial Decision Making. Springer, July 22 2020. https://rd.springer.com/chapter/10.1007/978-3-030-45500-2_7

Abstract: Understanding who takes particular financial decisions, and under which conditions, has clear implications both for decision-makers’ well-being and for financial advisors (e.g., investment and credit advisors). Improving understanding in this area would be helpful in constructing clients’ profiles and recommending adequate financial instruments to them in accordance with the requirements of the markets in financial instruments directive in Europe (European Union Markets in Financial Instruments Directive—MiFID II). Difficulties in matching people’s dispositions with financial products arise from the ways in which the influences of people’s dispositions on their financial decision-making interact with specific contexts. Thus, the natural expectation that certain relationships observed for one financial decision (e.g., investing) will generalize to other similar types of decision (e.g., saving), or even to the same type of decision (another investing decision) taken at another point in time, is not always borne out as decisions are taken in different contexts. In this chapter, we present an extensive review of research on relationships between individual dispositions and decisions involving financial risk (saving, investing, borrowing, and cheating) towards the end of analyzing the stability and consistency of the role of personality dispositions across various financial domains and between various decision contexts. We conclude that the role of individual dispositions in explaining various financial behaviors, and different aspects of the same financial behavior, often varies with context, supporting the idea that interactive models can describe the influence of personal and situational factors on financial decision-making. Thus, to correctly understand the role of individual dispositions, further studies should verify how situational and contextual factors modify individual factors’ influence on financial decision-making.

Keywords: Saving Investing Cheating Financial risk Personality Big Five Dark triad Self-control Motivation Time perspectives