Risky reflections: Insights into the role of personality in financial risk-taking through risk elicitation comparisons and prior outcomes

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Risk preferences influence financial decision-making, yet inconsistencies exist in how personality traits predict risk-taking. This study examines how personality traits affect risk preferences across different measures and how they interact with prior financial outcomes to influence risk-taking behaviour. A general population sample of 357 participants completed the IPIP-NEO-120 personality inventory, self-reported risk attitude and market participation surveys, and engaged in a sequential investment simulation with feedback on prior outcomes. Correlational and regression analyses of the survey data show that extraversion positively correlates with self-reported risk-taking and stock market participation. Using multilevel mixed-effects models to analyse the experimental data, this study is the first to demonstrate that personality traits moderate the effect of prior financial outcomes on subsequent risk-taking in an investment simulation. Specifically, individuals with low extraversion become more risk-averse after higher returns, while those high in openness or conscientiousness take more risks following worse prior outcomes. These findings highlight the importance of considering both personality traits and prior outcomes in understanding financial risk-taking and offer insights into the interplay of individual and situational factors in financial decision-making. The study provides practical implications for investor education and investment management strategies. • Personality directly predicts real-life and self-reported financial risk-taking. • Personality moderates the relationship between prior outcomes and experimental risk. • Low extraversion limits risk-seeking after higher prior returns. • High openness/conscientiousness spurs risk-taking following worse prior outcomes. • Findings offer implications for investor education and investment strategies.