Emerging Markets Finance and Trade

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Influence of Investor and Advisor Big Five

Personality Congruence on Futures Trading
Behavior

Muhammad Zubair Tauni, Zulfiqar Ali Memon, Hong-Xing Fang, Khalil Jebran
& Tanveer Ahsan

To cite this article: Muhammad Zubair Tauni, Zulfiqar Ali Memon, Hong-Xing Fang, Khalil
Jebran & Tanveer Ahsan (2019): Influence of Investor and Advisor Big Five Personality
Congruence on Futures Trading Behavior, Emerging Markets Finance and Trade, DOI:
10.1080/1540496X.2019.1672529

To link to this article: https://doi.org/10.1080/1540496X.2019.1672529

Published online: 09 Oct 2019.

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Emerging Markets Finance & Trade, 1–16, 2019
Copyright © Taylor & Francis Group, LLC
ISSN: 1540-496X print/1558-0938 online
DOI: https://doi.org/10.1080/1540496X.2019.1672529

Influence of Investor and Advisor Big Five Personality

Congruence on Futures Trading Behavior
Muhammad Zubair Tauni1, Zulfiqar Ali Memon2, Hong-Xing Fang3,
Khalil Jebran 3, and Tanveer Ahsan4
1
International Business School, Zhejiang Gongshang University, Hangzhou, China; 2Business
Administration Department, University of Sindh, Mirpurkhas Campus, Pakistan; 3School of
Accounting, Dongbei University of Finance and Economics, Dalian, China; 4Rennes School of
Business, Rennes, France

ABSTRACT: This study attempts to assess the influence of investor-advisor personality congruence on the
trading behavior of futures investor. This research tested the hypotheses based on the unique data set
collected from 408 investor-advisor dyads in the Chinese futures market. Our main data source is the
actual trading data of futures investors that we obtained directly from futures brokerage firms in China.
We performed Ordered Probit estimation to investigate the influence of investor-advisor personality
congruence on trading frequency. Our results provide empirical evidence that investors tend to trade
more futures when investor and advisor have congruence on openness, conscientiousness, and agree-
ableness. In contrast, investor-advisor congruence on neuroticism dampens investor's futures trading.
This research postulates that individual investors trade differently if they have personality congruence
(incongruence) with their advisors. Therefore, it is recommended that policymakers should consider
investor-advisor personality congruence to enhance their business performance in the retail investor
services industry.
KEY WORDS: Chinese futures market, futures trading, personality congruence, the Big Five

In the rapidly changing financial services industry, brokers are required to deal with investors in
a way that facilitates the sales of securities through a dyadic interpersonal relationship. Considering
retail investors’ limited capability to make informed trading decisions, more knowledgeable agents,
such as financial advisors, can play an instrumental role in determining investors’ financial choices.
The majority of investors regard brokers as their key source of information in trading decisions and
seek personal advice from them to reduce search costs and information asymmetries as well as risks
associated with investments (see e.g., Clark-Murphy and Soutar 2008; Lewellen, Lease, and
Schlarbaum 1977).
In one of the sub-disciplines of psychology, i.e., personality psychology, it is argued that
personality is a key determinant of human behavior. Trading decisions of investors represent
a form of human behavior, therefore, it can be argued that trading decisions of investors are also
influenced by their personality. The literature in the field of behavioral finance has documented
a number of studies that investigated the influence of investors’ Big Five personality on their trading
behavior (see e.g., Conlin et al. 2015; Durand et al. 2013; Durand, Newby, and Sanghani 2008; Tauni,
Fang, and Iqbal 2017; Tauni et al. 2015; Tauni, Rao, Fang et al. 2017a, 2017b; van Witteloostuijn and
Muehlfeld 2008). These studies have discovered how variations in investors’ personality may shape
their trading behavior in the financial markets. In recent studies, it has also been established that the
Big Five personality traits of advisor have a significant influence on investor’s trading frequency (see
e.g., Tauni et al. 2018; Yang, Hsu, and Tu 2012). These studies have shown that the trading behavior

Address correspondence to Hong-Xing Fang, School of Accounting, Dongbei University of Finance and
Economics, Dalian, China. E-mail: hxfang@dufe.edu.cn
Color versions of one or more of the figures in the article can be found online at www.tandfonline.com/mree.
2 M. Z. TAUNI ET AL.

of investor may also be attributed to the psychological characteristics of advisors, other than those of
investors. If the personality traits of investor and those of financial advisor have such a clear
influence on investor’s trading, then this knowledge might offer a more complete picture if we use
both investor’s as well as advisor’s personality characteristics to determine their joint influence on
trading behavior. One way of conducting such analysis is to examine the influence of investor-advisor
personality congruence on investor’s trading behavior which is the purpose of the current study.
Interpersonal similarity theory offers two contrasting viewpoints with regards to the group
functions. The first proposition theorizes that when the characteristics of group members are
compatible with each other (i.e., homogenous group), individuals are more capable of communicating
with one another and are highly motivated to work together (Muchinsky and Monahan 1987;
Neuman, Wagner, and Christiansen 1999). The second proposition states that a group composed of
diverse personality types (i.e., heterogeneous group) allows each member to contribute their unique
perspective which can help the group in providing solutions to difficult and abstract problems
(Neuman, Wagner, and Christiansen 1999).
The similarity-attraction paradigm is probably the best-known model to explain interpersonal
similarity theory. This model posits that people like and are attracted to other people who hold
attitudes, beliefs and personality traits, particularly important ones, similar to their own (Byrne 1971).
Human beings fundamentally seek consistency and logic in their worldview. As a result, they
privilege those stimuli that reinforce the same logic and consistency. The discovery of interpersonal
similarity between individuals validates their own characteristics and views and hence provides
support to their self-beliefs, attitudes, traits, behaviors, and ideas (Byrne and Clore 1970). The
similarity-attraction paradigm further postulates that interpersonal similarity between individuals
facilitates behavioral integration which results in better communication, frequent social interaction,
lower interpersonal conflicts, and a high desire to maintain group affiliation (see e.g., Lincoln and
Miller 1979).
With this belief, the conceptual framework of our study postulates that personality congruence
between investor-advisor dyad would influence the investor’s trading behavior in futures as shown in
Figure 1. To fulfill the purpose, we tested the research hypotheses based upon the unique dataset
obtained from 408 investor-advisor dyads in the Chinese futures market. We provide empirical
evidence that investor-advisor congruence on openness, conscientiousness, and agreeableness is
positively related to investor’s futures trading. On the other hand, advisor-investor congruence on
neuroticism negatively affects investor’s trading in futures. To the best knowledge of the researchers,
this is the first study conducted in the context of financial decision making that examines the
influence of investor-advisor personality congruence on trading behavior. No such research has
been carried out until now in the Chinese financial market and hence our study tries to fill this
research gap.

1. Literature Review
1.1. Investor’s Personality and Trading Behavior
Research in the domain of behavioral finance indicates how the trading behavior of investors is
influenced by their personality variables. Durand et al. (2013) found a positive association of conscien-
tiousness with trading behavior. They postulated that conscientious individuals exercise their efforts to
achieve desired results and hence trade more. Durand, Newby, and Sanghani (2008) found a positive
relationship between neuroticism and trading frequency. They argued that neurotic investors trade more
securities to overcome their unpleasant feelings. Brown and Taylor (2014) claimed that extraverted
households are more likely to invest in unsecured debts instruments. While conducting their research in
the Chinese financial market Tauni et al. (2015) showed that extraversion and conscientiousness
positively; and openness negatively moderates the relationship between information acquisition and
trading frequency. In another study, Tauni, Fang, and Iqbal (2017) found that investors with openness
 INFLUENCE OF INVESTOR AND ADVISOR 3

Figure 1. The influence of investor-advisor personality congruence on investor’s trading behavior.

and neuroticism traits trade more frequently when they acquire information from financial advice
whereas extraverted and conscientious investors trade less intensively when they use financial advice.

1.2. Advisor’s Psychological Characteristics and Investor’s Trading Behavior

There is relatively a lack of research in the financial markets on how advisor psychological character-
istics influence the advisor-client relationship. Joiner and Leveson (2006), Knights et al. (2001), and
Swinyard (1995) argued that trust and creditability of financial advisors significantly affect decisions of
customers to buy financial products. Bergeron and Vachon (2008) claimed that using humor, advisors
may influence customer purchase intentions, customer satisfaction, and how customers perceive service
quality. East (2006) showed that the positive moods of advisors may decrease customer skepticism
whereas the negative moods of advisors can increase customer skepticism. In an experiment, Söderberg
(2013) found that customers are more willing to follow the advice of smiling advisors than those of
frowning advisors. Analyzing the investor-trader dyads in the Taiwanese futures market, Yang, Hsu, and
Tu (2012) indicated that brokers with extraversion as well as conscientiousness personality inspire trust
and confidence in investors which consequently lead investors to trade more futures contracts. Tauni
et al. (2018) showed that investor trade more frequently when they obtain financial advice of open-
minded, conscientious, and agreeable advisors. They also claimed that extraverted and neurotic advisors
cause fewer adjustments in investor’s trading behavior.

2. Hypothesis Formation
General research concerning the Big Five expects open-minded individuals to be able to think outside
the box, question assumptions, and explore new perspectives to solve a problem (Barrick and Mount
1991). In terms of advisor-investor interaction, it appears that both the open-minded advisor and the
4 M. Z. TAUNI ET AL.

investor would benefit from the ability to challenge one another mentally, which would result in
positive team performance (Bernerth et al. 2008). As individuals with openness trait intend to be
more flexible and are able to adapt their decision making under various situations (e.g., Judge et al.
1999; LePine, Colquitt, and Erez 2000), open-minded advisor would be able to devise new sales
techniques or adapt their existing selling techniques to the changing market conditions in order to
increasing clients’ trading (Thoresen et al. 2004). Open-minded investor, on the other hand, would
likely to be receptive to new experiences and situations in a self-motived way. Therefore, the open-
minded investor would also take interest in the advisor’s idiosyncratic views and would be willing to
follow the advisor’s trading suggestions (Bozionelos 2004). Consequently, we hypothesize that:
Hypothesis 1: Investor-advisor congruence on openness trait is positively related to investor’s futures
trading.
Extraverts are generally sociable, gregarious, talkative, assertive, and comfortable in group settings
(see e.g., Costa and McCrae 1992). With this comfort level in group settings, it seems likely that
investor-advisor dyad with a similar level of extraversion would have a pleasurable social interaction.
The congruence of investor-advisor dyad on extraversion trait would result in high group perfor-
mance as sociable individuals want to be around other sociable individuals to enjoy reciprocal
positive feelings (Bernerth et al. 2008). Extraverted advisors would have higher energy levels,
dominance, and exhibitionism, and therefore would be more responsive to clients’ needs (Furnham
and Miller 1997). Besides, extraverted investors would also enjoy social interaction by discussing
trading strategies with their advisors (Costa and McCrae 1992). By doing so, sociable investors
would act upon the trading suggestions made by sociable advisors as it would enable the former to
identify with the latter (Sims 2002). Hence, we postulate that:
Hypothesis 2: Investor-advisor congruence on extraversion trait is positively related to investor’s futures
trading.

Conscientiousness trait is associated with the individuals who tend to be hardworking, organized,
responsible, persistent, and those who exhibit a strong sense of purpose (see e.g., Costa and McCrae
1992). According to the group-process literature, similarity in group conscientiousness level is
positively related to commitment, satisfaction, and therefore leads to positive team performance
(Kichuk and Wiesner 1997; Neuman, Wagner, and Christiansen 1999). Differences in group con-
scientiousness level, on the other hand, may lead to negative work performance because each member
is unlikely to put equal efforts to accomplish work and responsibilities (Meglino, Ravlin, and Adkins
1989). In conscientious investor-advisor dyad, a highly persistent advisor would show a strong
motivation toward work success. The advisor would gather more accurate information to be used
in the trading decisions of their clients (Heinström 2003). Likewise, the investor with conscientious-
ness trait would also feel a high degree of responsibility and therefore would display active involve-
ment in trading decisions. Both dyad members would work hard for the highest possibility to gain the
best trading outcomes (see e.g., Karz and Wagner 2006; Wagner and Banks 1992). By doing so,
advisors would boost the confidence of their clients, which in turn, would lead to more trading by the
clients (Mills and Moshavi 1999). Therefore, we posit that:
Hypothesis 3: Investor-advisor congruence on conscientiousness trait is positively related to investor’s
futures trading.
The personality trait of agreeableness is concerned with the tendencies toward trustworthiness,
kindness, and unselfishness (see e.g., Costa and McCrae 1992). The researchers have found that
the group members’ similarity in agreeableness is strongly associated with group cohesion and
performance (Barrick et al. 1998; Kichuk and Wiesner 1997; Neuman, Wagner, and Christiansen
1999). Agreeable advisors can achieve greater successes because they are more able to maintain
a trustworthy relationship with their clients (Swan, Bowers, and Richardson 1999). Individuals with
agreeableness trait are concerned about the welfare of others, therefore, agreeable advisors would be
 INFLUENCE OF INVESTOR AND ADVISOR 5

eager to solve the problems of their clients. In making decisions about the futures investment,
agreeable advisors would help their clients by gathering relevant investment information, and the
advisors’ quality of being compassionate would act as a driving force to inspire trust in their clients
which consequently would lead to more trading by the clients. Additionally, people with agreeable-
ness trait also seek harmony in social relations with others and are likely to form positive interactions
with them (Barrick, Stewart, and Piotrowski 2002). To maintain harmony, the agreeable investor
would less likely to be judgmental over the recommendations made by the advisor, and therefore,
would act upon the advisor’s trading suggestions without critical assessment (Eisen, Winograd, and
Qin 2002). Hence, we assume that:
Hypothesis 4: Investor-advisor congruence on agreeableness trait is positively related to investor’s
futures trading
Individuals with neuroticism trait are characterized by depression, insecurity, worry, anxiousness,
feelings of inadequacy, and are severely limited in their social skills (see e.g., Costa and McCrae
1992). Previous studies have shown that a group composed of individuals in high neuroticism is more
likely to be conflictual and less likely to be socially cohesive (Barrick et al. 1998), which leads to an
overall negative group-performance. Advisors and investors with neuroticism trait would be unlikely
to work effectively because they tend to be anxious, tense, and emotionally unstable which would
inhibit their work accomplishment (Furnham and Fudge 2008). Highly neurotic traders would be
worried about the trading results of the clients, which in turn, would increase their anxiety. They
would feel insecure because of uncertain happenings, such as the loss of businesses with their clients,
and as a result, would be unable to devise appropriate trading strategies for their clients. Therefore,
investors would be less likely to trade if they have neurotic advisors. Moreover, neurotic investors
would likely to experience negative emotions. Likewise, advisors, they would feel insecure about the
trading results and, therefore, would show less personal involvement in trading decisions (Tauni,
Fang, and Iqbal 2017). Therefore, we predict that:
Hypothesis 5: Investor-advisor congruence on neuroticism trait is negatively related to investor’s futures
trading.

3. Research Methods
3.1. Data Source and Participants
The research population of this study is sales representatives and investors in China who have
a business to consumer relationship. Due to the dyadic nature of the study, the selection of the
sample began with futures brokers. For this purpose, different brokerage firms from the Chinese
futures market were contacted to participate in the study. The data for the current study was collected
via multiple sources.
Our main data source is the actual trading data of futures investors that we obtained directly from
futures brokerage firms. The trading data includes the number of futures contracts that an investor
bought or sold through his/her futures broker. The full impact of investor-advisor personality
congruence on trading behavior could only be investigated if the broker-client dyad pair had some
experience of dealing with each other. Therefore, each dyad pair chosen in our study have been
trading together for at least one year. Dyadic matching occurred between one broker and one client.
The second phase of this research was accomplished through an online sampling technique using
a web-based survey. We constructed two types of online questionnaires for our sample subjects
including one questionnaire for futures brokers and second for their clients. We also used a cover
letter which provided a brief explanation of the study objectives. We distributed the link of an online
questionnaire to the investors whose trading records have been obtained from their respective
brokers. Investors filled out the questionnaire measuring their socio-economic characteristics, the
level of risk aversion, the level of financial knowledge, the use of financial advice, the frequency of
6 M. Z. TAUNI ET AL.

futures trading, and the Big Five personality traits. A separate link of an online questionnaire was also
sent among futures brokers who completed the questionnaire measuring the Big Five personality
traits. The online sampling technique was regarded as a suitable methodology to collect information
from respondents as it is less likely to suffer from the impacts of social desirability on responses
because of the absence of interviewers (Duffy et al. 2005).
Our database has the trading record of 1160 investors that we obtained from various brokerage
firms, therefore, we distributed 1160 paired online questionnaires. However, some investors as well
as traders did not fill out the questionnaire or left the questionnaire incomplete and therefore could
not be considered for analysis. After the exclusion of invalid responses, 408 effective paired
responses were used in the final analysis.

3.2. Measurement
The dependent variable in this study is the trading data of futures investors that we obtained directly
from futures brokerage firms. It was adopted from Abreu and Mendes (2012) and Durand, Newby,
and Sanghani (2008). The variable was measured as “the frequency of trading” which is denoted by
the number of futures contracts that an investor traded through his/her futures broker in the last
one year.
The five personality measures of the investor as well as those of advisor, namely openness,
extraversion, conscientiousness, agreeableness, and neuroticism, were adopted from the Big Five
theory (Costa and McCrae 1992) and were operationalized using NEO-FFI (Costa and McCrae 1989).
Measures of the personality traits that we used in our study have been frequently cited in the literature
of management and psychology. We measured each item of the personality traits using five-point
Likert scale that ranged from 1 to 5 as ‘1 = strongly disagree’, ‘2 = disagree’, ‘3 = neutral’,
‘4 = agree’, ‘5 = strongly agree’. To avoid biased responses, we reverse-scored numerous items of
personality constructs.
Based on previous studies (see e.g., Barber and Odean 2001; Dorn and Huberman 2005; Peress
2004; Yao and Xu 2015), various socio-economic characteristics of investors including gender,
marital status, age, income, education, trading experience, wealth, risk aversion, financial literacy,
and financial advice were added in our model to control for possible alternative explanations. One
can argue that people with more resources or wealth are more likely to trade securities. Based on the
study of Yao and Xu (2015) on Chinese households’ security market participation, we have taken the
value of the residential property as the proxy for investor’s wealth. We created a dummy variable to
know whether or not the value of the investor’s residential property was greater than 500,000 RMB.
We postulated that investors with a higher value of the residential property, and thus more wealth, are
likely to trade more.
Following the previous research, we have also considered investor’s risk aversion in our model
since it might directly affect investor trading in futures (e.g., Abreu and Mendes 2012; Dorn and
Huberman 2005; Peress 2004). Peress (2004) argued that investors of higher risk aversion might not
make investment decisions despite they possess accurate financial information. Dorn and Huberman
(2005) postulated that investors with more propensity to take risks are likely to increase trading. The
level of risk aversion was operationalized based on the study of Abreu and Mendes (2012) by asking
investors a question: “How do you consider yourself on the scale from 1–5 regarding the risk of
investment in the futures market: risk-averse (1), risk lover (5)”.
Financial literacy has also been taken into consideration to analyze its effects on investor's trading
behavior. It can be argued that the frequency of trading by investors who are more financially literate
may be differentiated from those with less financial knowledge. Dorn and Huberman (2005) indicated
that investors with actual financial knowledge tend to increase portfolio turnover. From the work of
Lusardi and Mitchell (2011), we measured the level of actual financial knowledge by asking investors
questions concerning compound interest, inflation, and diversification of risk. We evaluated the
 INFLUENCE OF INVESTOR AND ADVISOR 7

investors’ responses on the scale from “0 = all incorrect answers” to “3 = all correct answers”.
A higher value represents better financial knowledge.
Finally, based on previous research (e.g., Abreu and Mendes 2012; Tauni, Fang, and Iqbal 2017),
we have also controlled for financial advice that investors obtain from their advisors as it directly
affects investor's trading behavior. From the work of Abreu and Mendes (2012) and Tauni, Fang, and
Iqbal (2017), financial advice was measured by asking investors: “How frequently do you consult
your futures broker when you want to get information regarding futures market?” Answers were
coded on a five-point Likert scale that ranges from 1 to 5 as “1 = Not at all”, “2 = rarely”,
“3 = sometimes”, “4 = often”, “5 = every time”. Descriptive statistics and correlations among the
variables of the study are shown in Table 1.

4. Analysis and Findings

4.1. Determining the Investor-advisor Personality Congruence
We conducted a “difference score analysis” to determine the investor-advisor personality congruence.
For this purpose, we computed a difference score index by using the square root of the sum of
squared differences (D) between each personality item rated by the investor and that of the advisor
(Edwards 1994; Tisak and Smith 1994). This value reflects the Euclidean distance, which represents
dyad personality similarity/dissimilarity. Accordingly, lower D-score (i.e., D score close to zero)
indicates a similarity between dyad personalities.
Several researchers have discussed the strengths and weaknesses regarding the use of D statistics
(see e.g., Edwards 1994; Johns 1981; Tisak and Smith 1994). Although Edwards (1994) have
suggested the use of polynomial regression technique to assess the similarity in certain situations,
other researchers (see e.g., Tisak and Smith 1994; Witt and Ferris 2003) have argued that polynomial
regression technique is empirically driven and that the D statistics is more suitable when testing
a theory-driven hypothesis. As recommended by researchers (see e.g., Tisak and Smith 1994), we
minimized the concerns of the D-score by using multi-score and multi-item data. In particular, Tisak
and Smith (1994) argued that the D-score has the potential to cause high inter-correlations between
component variables if it is generated from a single source (i.e., from within-subject only).
Conversely, the correlation between the component variables can be acceptable if the data are
generated from different sources (i.e., investor and advisor). In addition to that, the reliability of
individual measures can also be increased by increasing the number of items. Hence, in the present
study, the concerns over the use of D-score were minimized by measuring congruence to the two
independent individuals with 12 items for each of the five personality sub-scales.

4.2. Socio-economic Variables and Investors’ Futures Trading (step-i)

‘The number of transactions per year’, our dependent variable in this study is a discrete variable that
only assumes non-negative integer and within which all values are in a meaningful order. This means
that the ordered probit regression would be a more appropriate choice for estimating the models.
We started the analysis by investigating how the socio-economic characteristics of Chinese futures
investors affect their trading behavior as illustrated in Table 2. Table 2 indicated that there exists
a positive relationship between financial advice and futures trades, meaning that the more the
investors obtain financial advice, the more they intend to trade in futures contracts. Our findings
are consistent with the previous studies (see e.g., Abreu and Mendes 2012; Fischer and Gerhardt
2007), that showed that investors increase trading frequency if they acquire information from
a trustworthy source, such as from a financial advisor, as it helps investors to improve the assessment
of their investments.
Table 2 also showed that male and younger investors tend to trade more futures contracts. Such findings
are consistent with the view that male and younger investors are more willing to take risks and therefore are
 8

Table 1. Descriptive statistics and correlations of study variables.

Variable M SD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1.Gender - -
2.Marital Status - - .096
3.Age - - −.010 .204**
4.Income - - .049 .159** .015
M. Z. TAUNI ET AL.

5.Education - - .042 −.017 .084 .028

6.Experience - - .081 .322** .133** .276** −.061
7.Wealth - - .056 .069* .033 .009 .063** .036
8.Risk Aversion 2.70 1.204 −.001 .209** −.063 .026 −.059 .100* −.010
9. Financial 1.53 1.300 .012 .092 .087* .78 .051* .112 .032 .032**
Literacy
10.Financial 3.28 1.350 .091 −.129** .012 .055 −.018 .121* −.003 .108 .073**
Advice
11.Trading 18.15 4.243 −.164** .011 .116* .165** −.070 .242** −.168** .116** −.169** .245**
Frequency
12.OPEN 4.98 2.51 .079 −.069 −.019 .002 .017 −.117* −.113* −.161** .408** −.009 −.225**
Congruence
13.EXTR 5.37 3.46 .047 −.020 .059 .023 .093 .105* −.015 −.104* .393** −.022 .087 .462**
Congruence
14.CONS 3.33 1.97 .096 −.091 .024 .136** −.077 .149** −.085 .024 .490** .135** −.257** .241** .397**
Congruence
15.AGRE 4.28 1.99 .157** −.098* .019 .064 −.017 .081 −.045 −.026 .537** .015 −.067 .388** .491** .025
Congruence
16.NEUR 4.06 2.09 .072 −.085 .024 .069 −.062 .131** −.050 −.008 .477** .124* .238** .367** .419** .124 .226*
Congruence

Notes: Table 1 reports the descriptive statistics and correlations of the study variables. These characteristics are based upon the sample of 408 futures investor-advisor dyads.
Investor related variables include gender, marital status, age, income level, education level, trading experience, wealth, level of risk aversion, level of financial literacy, frequency
of financial advice, and futures trading. Variables OPEN Congruence, EXTR Congruence, CONS Congruence, AGRE Congruence, and NEUR Congruence represent investor
and advisor similarity/dissimilarity on openness, extraversion, conscientiousness, agreeableness, and neuroticism respectively.
N = 408 futures investors, 408 futures brokers; M = Mean; SD = Standard Deviation.
** Correlation is significant at the 0.01 level (2-tailed).
* Correlation is significant at the 0.05 level (2-tailed).
 INFLUENCE OF INVESTOR AND ADVISOR 9

Table 2. Socio-economic variables and trading behavior.

Predictors Estimate Std. Error

Female −.637** .194

Not Married −.364 .211
Age <25 years .123** .424
Age 25–40 years .080 .402
Age 40–60 years .055 .417
Below High School .502 .315
High School .114 .271
Graduate −.311** .231
Income <10,000 −.878** .385
Income 10,000–20,000 RMB −.424 .369
Income 20,000–30,000 RMB −.325 .379
Income 30,000–40,000 RMB −.204 .413
Experience <2 years .095 .336
Experience 2–5 years −.022 .301
Experience 5–8 years −.575** .299
Experience 8–10 years −1.218*** .354
Wealth .156** .086
Risk Aversion −.246** .078
Financial Literacy .168** .096
Financial Advice .141*** .066
Pseudo R2 .314
Chi-Square 84.969***
Observations 408

Note: Table 2 presents the impact of socio-economic variables on trading behavior.

Results are computed using ordered probit regression. The dependent variable is “the
frequency of trading”. Gender, age, marital status, education, experience and income are
dummy variable with male, married, post-graduate, experience >10 years, income
>40,000 RMB as base categories respectively. The model includes a constant as well.
***Denote significance at 1%.
**Denote significance at 5%.
*Denote significance at 10%.

more likely to trade in futures (Barber and Odean 2001; Dorn and Huberman 2005; Haliassos and Bertaut
1995; Jianakoplos and Bernasek 1998; Sunden and Surette 1998). Furthermore, our results showed that
investors with a higher level of wealth trade more in futures, which is in accordance with the argument that
investors with more resources are more likely to invest in securities (Yao and Xu 2015).
However, the study found that investors with higher degrees and more experience tend to trade less
frequently. These findings are in line with the view that sophisticated investors are less likely to churn their
portfolios (Dorn and Huberman 2005). Likewise, it was also found that investor with a higher level of risk
aversion trade fewer futures contracts (Dorn and Huberman 2005; Vissing-Jørgensen and Attanasio 2003).
Finally, our study confirmed the prior findings that investors with a higher level of financial literacy tend to
trade more futures contracts (Dorn and Huberman 2005).

4.3. Influence of Investor-advisor Personality Congruence on Futures Trading Behavior

(step-ii)
The influence of investor and advisor Big Five personality congruence on investor's futures trading was
checked based on the conceptual framework of the study. The five composite scores of investor-advisor
10 M. Z. TAUNI ET AL.

Table 3. Investor-advisor personality congruence and trading behavior.

Probit Estimates OLS Estimates

Predictors Estimate Std. Error Estimate Std. Error

OPEN Congruence −.284** .146 −.129** .060

EXTR Congruence .087 .248 .014 .079
CONS Congruence −.414** .132 −.168*** .054
AGRE Congruence −.517*** .121 −.174** .049
NEUR Congruence .714** .114 .190* .043
Pseudo R2 .432 R Square .168
Chi-Square 186.347*** F-Statistics 18.758***
Observation 408 Observation 408

personality differences were entered into the regression model as shown in Table 3. To control for
alternative explanations in our results, the model included the controls of Table 2. However, these controls
were not shown in the interest of space. Apart from the probit estimation, the results of ordinary least
square (OLS) estimation have also been presented for robustness purpose.
The first hypothesis in this study postulates that investor-advisor congruence on openness trait has
a positive effect on investor’s futures trading. We checked this hypothesis in Table 3. The coefficient
of OPEN congruence with futures trading was negative and significant, which suggested that the
difference (similarity) in openness trait is negatively (positively) related to investor's trading in
futures and thus H1 was accepted.
We tested the second hypothesis of the study in Table 3, proposing that investor-advisor con-
gruence on extraversion trait is positively related to investor’s trading in futures. As is indicated by
the coefficient of EXTR congruence, we found no significant influence of investor-advisor extraver-
sion similarity in trading and therefore no support of H2 was found. It was somewhat surprising to
find that the differences in investor-advisor extraversion were not negatively related to investor
trading behavior. One possible explanation of these results, as proposed in group process literature,
may be that a group composed of extraverted individuals may not work effectively because all group
members begin to get leadership roles. If all members strive to have lead roles, this may result in
group conflicts (Neuman, Wagner, and Christiansen 1999). Thus, it may be suggested that extraverted
investors do not choose to trade with extraverted advisors.
The third hypothesis of our research posits that investor-advisor congruence on conscientiousness
trait has a positive influence on investor’s trading. This hypothesis was tested in Table 3. The
coefficient of CONS congruence explained a negative association with investor's trading, which
proved that the difference (similarity) in conscientiousness trait has a negative (positive) influence on
futures trading of investor and thus H3 was accepted.
The fourth hypothesis in our research suggests that investor-advisor congruence on agreeableness
trait is positively related to investor’s futures trading. We checked this hypothesis in Table 3. With
regards to agreeableness, we found a negative relationship of AGRE congruence with investor's
trading which indicates that the difference (similarity) in agreeableness have a negative (positive)
influence on investor’s trading and therefore H4 was accepted.
Finally, we checked the last hypotheses of this research in Table 3 concerning the relationship of
advisor-investor congruence on neuroticism with trading behavior. As illustrated in Table 3, the
coefficient NEUR congruence with investor's trading proved positive and significant, which indicated
that the difference (similarity) in neuroticism have a positive (negative) impact on investor’s trading
behavior, thus supporting H5.
 INFLUENCE OF INVESTOR AND ADVISOR 11

Table 4. Interaction of investor and advisor personality traits on trading

behavior.
Predictors Probit Estimates Std. Error

Investor OPEN x Advisor OPEN .787** .120

Investor EXTR x Advisor EXTR −.021 .019
Investor CONS x Advisor CONS 1.271*** .198
Investor AGRE x Advisor AGRE .198* .146
Investor NEUR x Advisor NEUR −.281** .204
Pseudo R2 .468
Chi-Square 205.172***
Observation 408

Note: Table 4 presents the interaction effect of investor-advisor personality on trading behavior.
The model has been computed using ordered probit estimation. The dependent variable is “the
frequency of trading”. The model includes a constant and the socio-economic variables of Table 2.
***Denote significance at 1%/
**Denote significance at 5%.
*Denote significance at 10%.

5. Robustness Check—An Alternative Estimation Technique (step-ii)

We estimated the joint effect of investor-advisor personality on trading behavior–using an alternative
estimation technique–by computing five interaction terms between investor and advisor Big Five
personalities as shown in Table 4. We performed an alternative estimation on the key findings of the
study as a cross-check on “difference score analysis”. To control for alternative explanations in our
results, the model included the controls of Table 2. However, these controls were not shown in the
interest of space.
Table 4 showed that there is a significant positive interaction effect of investor-advisor openness,
conscientiousness, and agreeableness on investor’s trading behavior. These relationships were also
plotted in Figure 2a,c,d where we examined the effect of the higher and lower level of advisor’s
openness, conscientiousness, and agreeableness with those of investor respectively. Results con-
firmed that at the high level of advisor traits (of openness, conscientiousness, and agreeableness),
the relationship between investor traits (of openness, conscientiousness, and agreeableness) and
futures trading strengthens.
On the contrary, the results in Table 4 showed that there is no significant interaction effect of
investor-advisor extraversion on investor’s trading behavior. In Figure 2b, we checked this relation-
ship by examining the effect of the higher and lower level of advisor’s extraversion with those of
investor. We found that at the high level of advisor’s extraversion, the relationship between an
investor’s openness and trading dampens. These results confirmed our prior argument that extraverted
investors do not choose to trade with extraverted advisors. More precisely the Figure 2b depicted that
high futures trading would only result if investors in low (high) extraversion trait are matched with
the advisor in high (low) extraversion trait.
Lastly, the results in Table 4 confirmed that there is a negative interaction effect of investor-
advisor neuroticism on trading behavior. This relationship can also be viewed graphically in Figure
2e which showed that at the higher level of advisor’s neuroticism, the relationship between investor’s
neuroticism and futures trading dampens. Unexpectedly, Figure 2e also portrayed that a match of
investors and advisor on low neuroticism trait may also lead to higher trading which means that
a dyad of emotionally stable individuals may function effectively.
12 M. Z. TAUNI ET AL.

a-Investor OPENX Advisor OPEN b-Investor EXTRX Advisor EXTR

5 5
4.5 4.5
4 Low 4

Trading
Trading

Advisor-
Low
3.5 OPEN 3.5 Advisor
-EXTR
3 3
High
2.5 Advisor- 2.5 High
OPEN
Advisor
2 2 -EXTR

1.5 1.5
1 1
Low Investor-OPEN High Investor-OPEN Low Investor-EXTR High Investor-EXTR

c-Investor CONSX Advisor CONS d-Investor AGREX Advisor AGRE

5 5
4.5 4.5
4 Low 4
Trading

Trading

Advisor- Low
3.5 CONS 3.5 Advisor-
AGRE
3 High 3
Advisor- High
2.5 CONS 2.5 Advisor-
2 AGRE
2
1.5 1.5
1 1
Low Investor-CONS High Investor-CONS Low Investor-AGRE High Investor-AGRE

e-Investor NEURX Advisor NEUR

5

4.5

4
Low
Trading

3.5 Advisor-
NEUR
3 High
Advisor-
2.5 NEUR
2

1.5

1
Low Investor-NEUR High Investor-NEUR

Figure 2. Interaction effect of investor and advisor personality traits on trading behavior. (a)Investor
OPEN X Advisor OPEN. (b)-Investor EXTR X Advisor EXTR. (c)-Investor CONS X Advisor CONS. (d)-
Investor AGRE X Advisor AGRE. (e)-Investor NEUR X Advisor NEUR.
 INFLUENCE OF INVESTOR AND ADVISOR 13

6. Conclusion and Implications

The aim of this study was to examine how the similarity between the psychological characteristic of
investor and advisor, namely the Big Five personality, influences investors' trading in futures. For this
purpose, we tested the research hypotheses based upon the unique dataset obtained from 408 investor-
advisor dyads in the Chinese futures market. Personality congruence between investor and advisor
was determined using “difference score analysis”. The study performed “Ordered Probit estimation”
to investigate the influence of investor-advisor personality congruence on investor's futures trading.
We conclude that investors tend to trade more in futures when investor and advisor have congruence
on openness, conscientiousness, and agreeableness trait. In contrast, investor-advisor congruence on
neuroticism trait dampens investor's futures trading.
From an academic perspective, this study contributes to the growing literature of behavioral
finance theory that explains the behavior of investors in financial markets based on various psycho-
logical factors (Barber and Odeab 1999). The behavioral finance theory suggests that investors cannot
perceive all related information since investor behavior is affected by various psychological processes
such as affect, cognition, and heuristics (e.g., Campbell 2006; Goetzmann and Kumar 2008;
Polkovnichenko 2005). Therefore, investors tend to make non-rational financial decisions when
they are influenced by these psychological processes. This study extends the theory of behavioral
finance by proposing that investors are likely to be influenced by yet another psychological char-
acteristics namely, investor-advisor personality congruence, and therefore investors tend to make non-
rational trading decisions.
The interaction between salespeople and clients is a complex phenomenon which involves a wide
range of theoretical processes. The results of this interaction may lead to gain (loss) of sales and satisfied
(dissatisfied) customer. We argue that the ability of salespeople to manage this complex interpersonal
sales relationship may depend upon salesperson-client personality congruence. Therefore, considering the
salesperson-client personality similarity or dissimilarity may help the policymakers enhance their busi-
ness performance in the retail investor services industry. In terms of specific results reported in this study,
it is suggested that firms in the financial services industry should consider personality congruence
(incongruence) when assigning clients to the salespeople. If a firm knows that the salesperson is extremely
open, conscientious, and agreeable; there appears to be no reason to assign any client who does not match
with the salesperson on these traits. A heterogeneity of client-salesperson dyad on these traits may lead to
loss of sales. On the contrary, a firm should avoid congruence on extraversion and neuroticism while
assigning clients to advisors as the heterogeneity on these traits may increase the firm’s revenue. The
investment management firms should also organize training programs to develop or foster personality
awareness in salespeople. These programs should educate on how salespeople can work through if they
interact with clients that have different personality traits.
The study has some of its limitations. While interpreting the results of this research, one should
also consider the idiosyncratic characteristics of our sample. The Chinese financial markets are
relatively newer and have fewer connections with the outside world. There are several institutional
differences among the Chinese financial markets and other ones in the globe. Investors in the
Chinese financial markets are less familiar with how financial markets work. Due to the collecti-
vistic nature of the Chinese culture, investors rely on government policies which are often made in
favor of some specific market participants and therefore such policies promote speculative
investment behavior in Chinese individual investors. Given this, future researches should also
be conducted in other emerging economies as well as in developed economies to validate the
results of this study. Future research should also consider panel data to determine the precise
direction of causality among the variables of the study. Finally, future studies should also consider
the joint influence of unrelated dyad personality traits on trading behavior. For example, it would
be interesting to examine whether or not a dyad composed of open-minded investor and extra-
verted advisor may work effectively.
14 M. Z. TAUNI ET AL.

ORCID
Khalil Jebran http://orcid.org/0000-0003-0594-4775

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