This systematic literature review reveals significant ties between big five traits and risk tolerance, guiding investor strategies.
Purpose: This paper studies the impact of Big Five personality traits on the financial risk tolerance of retail investors. The big five taxonomy model includes dimensions of neuroticism, agreeableness, openness to experience, conscientiousness, and extraversion traits. These traits can change the risk tolerance level of individuals in terms of their investment decisions. This paper analyses all the research conducted on this relationship. The stockbrokers and fund managers can benefit from the results as they advise on personalized investment strategies and risk management practices. These drivers also impact broader market trends and lead to instabilities. So, this study is crucial for financial advisors, investors, and policymakers. Design/methodology/approach: The author has conducted a systematic literature review to identify existing relevant work from various authors who have studied the relation between Big Five personality traits and risk tolerance in retail investors. This paper includes literature from 2000 to 2025. Most authors have used a survey to calculate personality traits and risk tolerance; few have used buying and selling data. Findings: The findings show a significant impact of personality traits on investors' investment decisions and risk-taking behaviour. Most of the traits have a significant relation and a few have an insignificant relation with the financial risk tolerance of retail investors. Practical implications: Retail investors should make investment decisions after taking into account the influence of personality traits and their risk tolerance. The financial advisers can analyse this relation in terms of clients and then advise them accordingly. Social implications: All types of investors can gain insight into the relationship between the personality traits of individuals and their risk tolerance levels. Originality/value: The interrelation of Big Five taxonomy with the risk tolerance of retail investors and the research gap has been identified
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Khaitan et al. (2025) studied this question.
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