خودشیفتگی و بازار سهام سرمایه گذاری: ارتباط و پیامدهای سرمایه گذاری پر افاده

Two studies tested whether narcissists are prone to making risky stock market investments. In Study 1, narcissistic participants reported being more inclined to invest in stocks that exhibited high volatility (i.e., large price fluctuations). In study 2, participants created hypothetical investment portfolios using a selection of real stocks whose values were tracked for a five-week period. Narcissists selected more highly volatile stocks for their portfolios and this tendency was explained by narcissists’ heightened approach motivation. Narcissists also lost significantly more money during the tracking period—the stock market as a whole declined by approximately 30% during the tracking period—and this was fully explained by the heightened volatility of their investments. Cumulatively, these results suggest that narcissistic personality is linked to risky stock market investing, which is especially maladaptive during periods of economic decline.

The global economy is in the midst of its worst decline since the Great Depression. The causes of this financial calamity are varied and complex, although many commentators speculate that cocksure investors and corporate leaders played a significant role by making risky and often foolhardy financial decisions (e.g., Cohan, 2009 and Gladwell, 2009). What fueled this cocksureness? During the 1990s and early 2000s, the economy experienced one of the most prominent bull markets in history. Investors were positive about the future and confident that their investments would pay off. For instance, when surveyed in October 2007, more than three-quarters of individual and institutional investors predicted that the US stock market would rise during the next year (Shiller, 2000 and Shiller, 2009). These investors were clearly overconfident because the stock market ultimately plunged by nearly 40%. Economic climate played an important role in investor exuberance and overconfidence. However, the level of risk that investors bore is probably not fully explained by situational factors alone. Consider that during even the historic bull markets of the 1990s and early 2000s, most investors did not utilize risky financial instruments, such as derivatives. Most families purchased homes within their means. Most corporations’ investments were not leveraged to the point that even a small fraction of losses would be ruinous. The economic situation was not so powerful that everyone simply got swept up by a tsunami of financial risk-taking. Flagrant financial risk-taking was prevalent during this time period, but it was limited to a proportion of investors. The purpose of the present research was to examine one characteristic, narcissistic personality, that we think might distinguish these risky investors from the general investor population. Narcissism is particularly relevant to the current economic crisis. Narcissists1 are more likely than others to rise to leadership positions (Brunell et al., 2008). Thus, the financial decisions that narcissists make affect greater numbers of individuals (e.g., employees, investors, tax-payers). Although we cannot say for certain how many corporate leadership positions were/are occupied by narcissists, anecdotal evidence suggests that narcissists are overrepresented in this population. To the extent that corporate leaders of the recent past were more narcissistic than the general population, and if narcissism is indeed linked to financial risk-taking, then narcissism might have played a role in the economic meltdown. Why would narcissists be expected to make risky financial decisions? Financial decisions are often preceded by an assessment of risk (i.e., potential financial losses) and reward (i.e., potential financial gains). Individuals who are more strongly motivated by reward (i.e., highly approach motivated) than punishment (i.e., weakly avoidance motivated) tend to make riskier financial decisions (e.g., Hamilton and Biehal, 2005 and Zhou et al., 2004). Recent research suggests that narcissism is characterized by strong approach motivation and weak avoidance motivation (Foster et al., 2010, Foster et al., 2010 and Foster and Trimm, 2008). That is, narcissists are more strongly motivated by reward acquisition than punishment avoidance. Thus, narcissists should be expected to make riskier financial decisions. Evidence supporting this hypothesis comes from studies showing that narcissists engage more frequently in risky financial activities, such as gambling (Lakey, Rose, Campbell, & Goodie, 2008). More directly, Foster, Misra et al. (2010) showed that narcissists are more likely to endorse financial investment strategies that couple high risk with high reward potential (e.g., investing in stocks rather than bonds). The purpose of the present study was to test whether narcissism predicts financial risk-taking within the specific context of stock market investing. We hypothesized that narcissism would predict a tendency to invest in riskier stocks, with “risky” being defined in terms of a stock’s volatility. Stock volatility—i.e., how much a stock’s value (i.e., price per share) fluctuates relative to other stocks—is a useful metric of stock riskiness for a couple of reasons. Practically speaking, there exist well-established measures of stock volatility. One of these measures is the economic indicator β (used in Study 2), which indicates how much a single stock’s value fluctuates relative to a market indicator, such as the S&P 500 or FTSE. In terms of validity, highly volatile stocks are indeed risky investments. Put simply, highly volatile stocks are riskier than average stocks because their price valleys are deeper. However, they are also more potentially rewarding because their price peaks are higher. Because narcissists are more strongly motivated by reward than punishment, they should make investment decisions that maximize reward potential even at the cost of heightened risk exposure. In other words, highly volatile stocks should be particularly attractive to narcissists. If our hypothesis is correct, then narcissism should be an adaptive personality trait during economic bull markets and a maladaptive trait during economic bear markets. This is because volatility correlates positively with price during bull markets (i.e., when most stocks’ values are rising) and negatively with price during bear markets (i.e., when most stocks’ values are falling). Therefore, investing in more volatile stocks will generally result in greater profits during bull markets and greater losses during bear markets. In this article, we present findings from two studies that test the link between narcissism and risky stock market investing. In Study 1, participants were asked to select which stock they would rather invest money into from amongst four hypothetical stocks depicted by plots showing varying degrees of volatility. In Study 2, participants created hypothetical investment portfolios using actual stocks and performance indicators, including β. In both studies, narcissistic participants were expected to be attracted to highly volatile stocks. Specifically, narcissistic participants were expected to select stocks depicted in plots showing high volatility (Study 1) and create investment portfolios more heavily populated with highly volatile stocks (Study 2). Finally, the investment portfolios created in Study 2 were tracked for five weeks to determine whether narcissism predicts investment performance. By chance, the US stock market experienced a historic collapse during this tracking period, which allowed us to examine how investments by narcissists perform during strong economic declines (i.e., a bear market).