Personality traits and financial outcomes


Xu, Yilan; Beller, Andrea H.; Roberts, Brent W.; & Brown, Jeffrey R. (2014). Personality traits and financial outcomes. 2014 Add Health Users Conference. Bethesda, MD.


The recent economic crisis has brought into stark reality the inadequacy of financial literacy in the United States. For example, many people borrowed on mortgages that they could not sustain and thus ended up in default or foreclosure. Following the recent work on non-cognitive skills, we propose to adapt an interdisciplinary approach at the borders of economics, psychology, and finance to investigate the new question of the role of personality in such financial decisions for a sample of young adults born in the late 1970s. The National Longitudinal Study of Adolescent Health (Add Health) dataset uniquely combines individual personality measures with financial choices. It contains data in Waves I (1994-95) and IV (2007-08) on three of the "Big Five" personality traits: extraversion, neuroticism, conscientiousness. We use those traits available in adolescence as instrumental variables for personality traits in young adulthood when the financial decisions are made. The poor financial outcomes of the adults include high debt ratios, unaffordable home mortgages, and missing bills, which we consider as proxies for financial literacy. The identification of relations between personality traits and financial decision-making can lead to important policy implications, whereby personality interventions in childhood can be used as an innovative approach to head off the over-indebtedness and other financial difficulties faced by U.S. households.


Reference Type

Conference proceeding

Book Title

2014 Add Health Users Conference


Xu, Yilan
Beller, Andrea H.
Roberts, Brent W.
Brown, Jeffrey R.

Year Published


City of Publication

Bethesda, MD

Reference ID