The Effect of Personality Traits and Demographic Characteristics ...

[Pages:127]The Effect of Personality Traits and Demographic Characteristics Towards Risk Tolerance and Investment Decision Making

GROUP A045

THE EFFECT OF PERSONALITY TRAITS AND DEMOGRAPHIC CHARACTERISITCS TOWARDS RISK TOLERANCE AND INVESTMENT DECISION

MAKING

BY ANG SHIAO ZHUAN CHUAH CHEA YING

KUI SIEW BOON SOO LI HUI

WONG CHIN HONG

A Research project submitted in partial fulfillment of the requirement for the degree of

BACHELOR OF FINANCE (HONS) UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF BUSINESS AND FINANCE

DEPARTMENT OF FINANCE AUGUST 2016

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The Effect of Personality Traits and Demographic Characteristics Towards Risk Tolerance and Investment Decision Making

Copyright @ 2016 ALL RIGHT RESERVED. No part of this paper may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, graphic, electronic, mechanical, photocopying, recording, scanning, or otherwise, without the prior consent of the authors.

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The Effect of Personality Traits and Demographic Characteristics Towards Risk Tolerance and Investment Decision Making

DECLARATION

We hereby declare that: (1) This undergraduate research project is the end of our own work and that due to acknowledgement has been given in the references to ALL sources of information be they printed, electronic, or personal. (2) No portion of this research project has been submitted in support of any application for any other degree or qualification of this or any other degree or qualification of this or any other university, or other institutes of learning. (3) Equal contribution has been made by each group member in completing the research project. (4) The word count of this research report is 25,249 .

Name of Student 1. Ang Shiao Zhuan 2. Chuah Chea Ying 3. Kui Siew Boon 4. Soo Li Hui 5. Wong Chin Hong

Student ID 13ABB07105 13ABB08041 13ABB07230 13ABB08430 13ABB08429

Date: 25th August 2016

Signature

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The Effect of Personality Traits and Demographic Characteristics Towards Risk Tolerance and Investment Decision Making

ACKNOWLEDGEMENT

This research project has been successfully completed with the assistance of various authorities. The research group would like to thank all those who have helped in carrying out this research and have offered comments and suggestions. First of all, the research group would like to thank to University Tunku Abdul Rahman (UTAR) for giving this opportunity to conduct this research project as partial fulfilment of the requirement for the degree of Bachelor of Finance (Hons).

Secondly, the research group would like to express the deep gratitude to the research supervisor, Pn. Nurul Nabila Binti Jasli for her patient guidance, enthusiastic encouragement and useful critiques of this research work. During the period of completing this research, Pn. Nurul provided guidance, advice, valuable suggestion, constructive comment and commitment to reply queries promptly throughout this research work. Her willingness to give her precious time so generously has been highly appreciated.

Next, the research group extends acknowledgement towards the UTAR lecturers and tutors who have guided the group directly and indirectly with new knowledge and ideas on the process of completing this research. Furthermore, the research group is grateful for the support from parents and friends who helped a lot in finalizing this research within the limited time frame.

Lastly, the cooperation and support received from all group members of this research group who has contributed to this research project are vital for the accomplishment of this project. The ideas, suggestions, and perspective from the group members have greatly enhanced this research projects content. Once again, the research group is in grateful and in appreciation of all the assistance contributed from every party in this research.

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The Effect of Personality Traits and Demographic Characteristics Towards Risk Tolerance and Investment Decision Making

TABLE OF CONTENT PAGE

Copyright Page --------------------------------------------------------------------------- II Declaration ------------------------------------------------------------------------------ III Acknowledgement ---------------------------------------------------------------------- IV Table of Content ------------------------------------------------------------------------- V List of Tables -------------------------------------------------------------------------- VIII List of Figures ---------------------------------------------------------------------------- X List of Appendices ---------------------------------------------------------------------- XI List of Abbreviations ------------------------------------------------------------------ XII Preface --------------------------------------------------------------------------------- XIII Abstract -------------------------------------------------------------------------------- XIV CHAPTER 1 RESEARCH REVIEW 1.0 Introduction --------------------------------------------------------------------------- 1 1.1 Research Background -------------------------------------------------------------- 2 1.2 Problem Statement ------------------------------------------------------------------ 3 1.3 Research Objectives and Questions ---------------------------------------------- 6 1.4 Hypothesis of Study ---------------------------------------------------------------- 7 1.5 Significant of Study ----------------------------------------------------------------- 9 1.6 Chapter Layout -------------------------------------------------------------------- 10 1.7 Conclusion ------------------------------------------------------------------------- 11 CHAPTER 2 LITERATURE REVIEW 2.0 Introduction ------------------------------------------------------------------------ 12 2.1 Review of Literature

2.1.1 Dependent Variable --------------------------------------------------------- 12 2.1.1.1 Investment Decision------------------------------------------------- 12

2.1.2 Moderating Variable -------------------------------------------------------- 14 2.1.2.1 Risk Tolerance ------------------------------------------------------ 14

2.1.3 Independent Variables ------------------------------------------------------ 15 2.1.3.1 Extroversion --------------------------------------------------------- 15 2.1.3.2 Agreeableness ------------------------------------------------------- 17

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The Effect of Personality Traits and Demographic Characteristics Towards Risk Tolerance and Investment Decision Making

2.1.3.3 Conscientiousness -------------------------------------------------- 19 2.1.3.4 Neuroticism ---------------------------------------------------------- 21 2.1.3.5 Openness to Experience -------------------------------------------- 24 2.1.4 Demographics Variables ---------------------------------------------------- 25 2.1.4.1 Investment Experience --------------------------------------------- 25 2.1.4.2 Financial Literacy --------------------------------------------------- 27 2.1.4.3 Gender ---------------------------------------------------------------- 29 2.2 Review of the Relevant Theoretical Models ---------------------------------- 30 2.3 Conceptual Framework ----------------------------------------------------------- 33 2.4 Hypothesis Development -------------------------------------------------------- 35 2.5 Conclusion ------------------------------------------------------------------------- 36 CHAPTER 3: METHOLOGY 3.0 Introduction ------------------------------------------------------------------------- 37 3.1 Research Design ------------------------------------------------------------------- 37 3.2 Data Collection Methods --------------------------------------------------------- 38 3.3 Sampling Design ------------------------------------------------------------------ 38 3.3.1 Target Population ------------------------------------------------------------ 38 3.3.2 Sampling Frame and Sampling Location --------------------------------- 39 3.3.3 Sampling Element ----------------------------------------------------------- 39 3.3.4 Sampling Technique --------------------------------------------------------- 39 3.3.5 Sampling Size ---------------------------------------------------------------- 40 3.4 Research Instrument -------------------------------------------------------------- 41 3.5 Constructs Measurement --------------------------------------------------------- 42 3.5.1 Scale of Measurement ------------------------------------------------------- 42 3.5.1.1 Nominal Scale ------------------------------------------------------- 42 3.5.1.2 Ordinal Scale -------------------------------------------------------- 43 3.5.1.3 Likert Scale ---------------------------------------------------------- 43 3.6 Data Processing ------------------------------------------------------------------- 44 3.6.1 Checking ---------------------------------------------------------------------- 44 3.6.2 Editing ------------------------------------------------------------------------- 44 3.6.3 Coding ------------------------------------------------------------------------- 44 3.6.4 Transcribing ------------------------------------------------------------------ 45 3.7 Data Analysis ---------------------------------------------------------------------- 45 3.7.1 Descriptive Analysis -------------------------------------------------------- 45

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The Effect of Personality Traits and Demographic Characteristics Towards Risk Tolerance and Investment Decision Making

3.7.2 Scale Measurement ---------------------------------------------------------- 46 3.7.3 Multiple Linear Regression Analysis ------------------------------------- 47 3.8 Conclusion -------------------------------------------------------------------------- 48 CHAPTER 4: DATA ANALYSIS 4.0 Introduction ------------------------------------------------------------------------- 50 4.1 Descriptive Analysis -------------------------------------------------------------- 50 4.1.1 Respondent Demographic Profile ----------------------------------------- 50 4.1.2 Central Tendencies Measurement of Construct ------------------------- 52 4.2 Scale Measurement --------------------------------------------------------------- 62 4.3 Inferential Analysis --------------------------------------------------------------- 63 4.4 Multiple Linear Regression Analysis ------------------------------------------ 74 4.5 Conclusion ------------------------------------------------------------------------- 77 CHAPTER 5: DISCUSSION AND CONCLUSION 5.0 Introduction ------------------------------------------------------------------------ 78 5.1 Summary of Statistical Analysis ----------------------------------------------- 78 5.2 Discussion of Major Findings -------------------------------------------------- 81 5.3 Implication of Study ------------------------------------------------------------- 87 5.4 Limitation of Study --------------------------------------------------------------- 88 5.5 Recommendation for Future Study --------------------------------------------- 89 5.6 Conclusion ------------------------------------------------------------------------- 89 References ------------------------------------------------------------------------------- 91

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The Effect of Personality Traits and Demographic Characteristics Towards Risk Tolerance and Investment Decision Making

LIST OF TABLES PAGE

Table 1.0: The Defination of the Youth and Young people by different organization -------------------------------------------------------- 5

Table 2.0: Expected Effect on Risk Attitude of Personality Traits -------------- 30 Table 3.1: Rule of Cronbachs Alpha Coefficient Value ------------------------- 47 Table 4.1: Demographic Profile of the Respondents ------------------------------ 50 Table 4.2: Personality Traits ? Extroversion --------------------------------------- 53 Table 4.3: Personality Traits ? Agreeableness ------------------------------------- 54 Table 4.4: Personality Traits ? Conscientiousness --------------------------------- 55 Table 4.5: Personality Traits ? Neuroticism ---------------------------------------- 56 Table 4.6: Personality Traits ? Openness to Experience -------------------------- 57 Table 4.7: Risk Tolerance ------------------------------------------------------------- 58 Table 4.8: Investment Decision ------------------------------------------------------ 60 Table 4.9: Cornbrashs Alpha -------------------------------------------------------- 62 Table 4.10: Summary of Multiple Regression Model (1) ------------------------ 63 Table 4.11: The impact between extroversion personality and the young

potential investors risk tolerance -------------------------------------- 65 Table 4.12: The impact between agreeableness personality and the young

potential investors risk tolerance -------------------------------------- 66 Table 4.13: The impact between conscientiousness personality and the

young potential investors risk tolerance ----------------------------- 67 Table 4.14: The impact between neuroticism personality and the young

potential investors risk tolerance -------------------------------------- 68 Table 4.15: The impact between openness to experience personality and

the young potential investors risk tolerance ------------------------- 69 Table 4.16: Correlation between risk tolerance and investment experience --- 70 Table 4.17: Correlation between risk tolerance and financial literacy ---------- 71 Table 4.18: Correlation between risk tolerance and gender ---------------------- 72 Table 4.19: Correlation between risk tolerance and investment decision ------ 73 Table 4.20: Summary of Multiple Regression Model (1) ------------------------ 74

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