Essays on moral emotions, personality traits, and the determinants of socially responsible investment decisions of retail investors

Gevorkova, V. (2024) Essays on moral emotions, personality traits, and the determinants of socially responsible investment decisions of retail investors. PhD thesis, University of Reading. doi: 10.48683/1926.00118958

Abstract/Summary

This thesis contributes to the body of research exploring the factors that influence the Socially Responsible Investment (SRI) decision-making of retail investors. In the three main chapters of this thesis, I empirically investigate how emotions, personality traits, and individual values influence these decisions. First, I explore the effect of incidental guilt on ethical investing. I provide evidence that when presented with a trade-off between sustainability, risk, and return characteristics of the funds, guilty investors are willing to sacrifice more returns for sustainability than non-guilty participants. I show that this effect, albeit moderate in magnitude, cannot be solely attributed to differences in retail investors’ moral reasoning, attitudes toward social responsibility, risk tolerance, and demographic factors. Next, I investigate the impact of personality on ethical investing. I provide evidence that personality traits are relevant factors in the decision-making process of retail investors that drive but also prevent SRI choices. I show that individuals with higher openness to experience, conscientiousness, agreeableness, honesty-humility, guilt-proneness, and stronger altruistic values make more SRI choices and are more willing to sacrifice returns for sustainability. I also provide evidence that greed and neuroticism negatively impact the number of green investment choices made, whereas less greedy and more emotionally stable retail investors are willing to forego more expected returns for an ethical allocation. Finally, I explore the joint effect of warm glow and altruistic values on individuals’ willingness to invest in sustainable funds. My findings reveal that, at an individual level, both stronger altruistic values and a greater tendency to experience warm glow result in more ethical allocations. However, framing investments in an altruistic light leads to a higher willingness to allocate funds to SRI compared to warm glow framing. This implies that motivations rooted in prosocial values tend to be more effective in driving SRI decisions.

Item Type	Thesis (PhD)
URI	https://reading-clone.eprints-hosting.org/id/eprint/118958
Identification Number/DOI	10.48683/1926.00118958
Divisions	Henley Business School
Date on Title Page	November 2023
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