The Economic Preference Parameters Risk Attitude and Ambiguity Attitude and Their Association With the Big Five Traits and Facets

Background: Linking personality to various outcomes has a long academic history but is a rather new discipline in economics. Previous research in economics was able to find an association between the Big Five traits Agreeableness and Neuroticism and the economic preference parameter risk attitude. However, no link between personality and the economic preference parameter ambiguity attitude could be established. I evaluated the association between personality and the two economic preference parameters risk attitude and ambiguity attitude. Methods: I used the NEO-IPIP-120 to measure the Big Five traits (Neuroticism, Extraversion, Openness, Agreeableness, and Conscientiousness) and the 30 Big Five facets. Risk attitudes and Ambiguity attitudes were elicited using the design of Borghans et al. (2009). To understand the relationship between personality and the economic preference parameters I used linear regressions, zero-order correlations, and semi-partial correlations. I validated the regressions using the holdout method. Results: Data from 237 participants were included in the analysis. The holdout method indicated that the Big Five traits and facets are weak predictors of risk attitudes and ambiguity attitudes, however, the traits and facets still revealed significant directional effects. The regressions showed that the Big Five trait Conscientiousness (p = 0.03) is positively related to risk aversion, and the Big Five trait Agreeableness (p = 0.005) is positively related to ambiguity aversion. The Big Five facet N4 Self-Consciousness (p = 0.009) is negatively related to risk aversion. Furthermore, the Big Five facets provided incremental benefits in estimating risk attitudes: the facet model exhibited a 5 times higher adjusted R2 compared to the trait model. No incremental benefits were observed when estimating ambiguity attitude with facets. Conclusion: Conscientious people tend to be more risk averse, Agreeable people tend to be more ambiguity averse, and Self-Conscious people tend to be more risk seeking. I recommend the usage of the Big Five facets in future studies because of the incremental benefits they can provide.