The role of behavioral factors in shaping asset allocation decisions: an empirical investigation

Abstract

The present study is aimed at exploring the relationship between individual investors’ characteristics and their asset allocation decisions. By analyzing the profile of a group of investors and relating it to their investment portfolios, it is possible to understand how socio-demographic and behavioral factors affect individuals’ decisions in the investment domain. The behavioral factors taken into consideration in the research include individual personality traits like anxiety, self-confidence and impulsivity, as well as recurring behavioral biases in decision-making such as loss aversion, regret aversion, herd behavior, optimism and projection bias. Data on investor profiles and associated portfolios have been provided by a local Cooperative Credit Bank, and they are based on the results of a client questionnaire developed by Schroders.