Journal article

Locus of control and investment in risky assets

Nicolas Salamanca Acosta, Andries de Grip, Didier Fouarge, Raymond Montizaan

Journal of Economic Behavior and Organization | Elsevier | Published : 2020


Internal locus of control is an important personality trait strongly related to many economic outcomes. We show that the probability to own equity and the share of equity in household portfolios increase with people’s internal locus of control. We explore, and find no evidence for, the hypothesis that this relation is driven by a link between internal economic locus of control and subjective expectations about the return and risk of investment in equity. The relation between locus of control and investment in equity also remains after controlling for risk and time preferences, financial literacy, overconfidence, optimism, trust, and other personality traits. We also show that locus of contro..

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Awarded by Australian Research Council Centre of Excellence for Children and Families over the Life Course

Funding Acknowledgements

We thank Eric Bonsang, Lex Borghans, Deborah Cobb-Clark, Denis de Crombrugghe, Thomas Dohmen, Alexandra de Gendre, Bart Golsteyn, Thomas Post, Stefanie Schurer, Paul Smeets, Ulf Zolitz, and especially Jan Feld for their helpful suggestions, and participants at various seminars and conferences for their comments. This research was supported by the Australian Research Council Centre of Excellence for Children and Families over the Life Course (project number CE140100027). The Centre is administered by the Institute for Social Science Research at The University of Queensland, with nodes at The University of Western Australia, The University of Melbourne and The University of Sydney. The views expressed herein are those of the authors and are not necessarily those of the Australian Research Council. In this paper use is made of data of the DNB Household Survey.