Financial Cognitions,Personality Traits And Household Portfolio Research

The core problem of family finance research is to realize the optimal allocation of existing resources or wealth in both income and risk to meet current and future consumption demand through financial market.According to traditional financial theory,households should hold risky assets and diversify their risk by diversification.However,with the implementation of a large number of microhousehold surveys at home and abroad,the findings of empirical results are quite different from theoretical analysis.A series of challenges to the traditional family finance theory have prompted the scholars to re-examine the hypothesis of classical theory,and they try to make the portfolio theory better depict the real family asset selection behavior by relaxing the hypothesis.At the same time,behavioral finance has made rich achievements in the study of the heterogeneity of family portfolio from the perspective of cognitive ability,emotion and other individual cognitive character perspective.It puts the "person" into the field of study,opens up the finance research thought and method,in order to perfect and revise the financial theory and make it more credible and effective.There is also a large number of literature find that other non-cognitive ability such as the personality also has a strong explanatory power in financial decision-making.In general,most of the studies have studied the influence of cognitive ability,personality trait and other factors on household portfolio selection separately,but limited research is done under the framework of individual psychology that combines cognitive ability and personality traits.In particular,considering the complexity of family financial decision-making and the limited rationality of investors,factor financial cognition is introduced,which reflects the human capital factor of professional financial accomplishment.Based on the literature review,we make a series of theoretical hypotheses of the influence of cognitive ability,personality characteristics and financial cognition on family portfolio selection,and then test the theoretical hypotheses by constructing Ivprobit,Ivtobit and Poisson models.The data is from the Chinese Financial Research Center of Tsinghua University household consumer finance survey.The main conclusions of this paper are as follows: 1.Compared with cognitive ability,financial cognition has much more power in explaining family asset choice behavior,and investors with higher level of financial cognition are more likely to participate in financial market and decentralize investment.This shows that family financial decision-making is complex and requires investors to have a certain professional knowledge.2.In general,the financial cognition level of respondents is low,and the respondents with different financial cognition have important differences in risk financial assets holding,participation degree and diversification.This phenomenon still exists after controlling risk attitude factor.The financial cognition has significantly improved the participation possibility and allocation ratio of the high information density financial markets such as stocks,funds and bonds,and has crowding out effect on the risk-free assets.Investors with high level of financial awareness have a higher degree of decentralization of household assets.3.Personality traits conscientiousness and neuroticism of Big Five have a significant impact on the family asset allocation behavior.Conscientiousness reduces the fund,bond market participation and allocation ratio,and ultimately decreases family assets decentralized level.Contrary to the influence of conscientiousness,the possibility and proportion of participation in risk markets are increased,and the decentralization of family portfolio are facilitated with agreeableness.The influence of neurotic personality is more reflected in the risk-free assets of saving deposits,and promotes the participation of the savings market.4.The inclusion of financial cognition factor in the Big Five personality model changes the size and significance of personality coefficients,which means financial cognition regulates the influence of personality traits on household financial market behaviors.In particular,financial cognition promotes the personal traits that favorable to market participation,and improves the personality traits which are unfavorable to market participation.Through a variety of robustness tests,we find that the role of financial cognition and personality traits in financial asset market participation,participation degree and diversification is steady and significant.The findings of this paper provide new evidence of cognitive ability and non-cognitive ability in explanation of heterogeneity of household portfolios.