Researcher ORCID Identifier
0009-0002-1948-2903
Graduation Year
2026
Date of Submission
12-2025
Document Type
Campus Only Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Professor Peter Kelly
Rights Information
2025 Tendai M Nyamuronda
Abstract
One of the most persistent puzzles in household finance is the limited participation of individuals in equity markets despite the historically high equity premium. In this thesis, I seek to answer the question of why some people stay invested in stocks when the economy shifts, while others pull back by examining the Big Five personality traits in relation to macroeconomic indicators. I find that individuals high in Conscientiousness and Openness are more likely to participate in the stock market during periods of high inflation or economic expansion, reflecting adaptive and opportunity-seeking behavior. In contrast, Neuroticism is associated with reduced participation in the face of uncertainty, consistent with heightened sensitivity to risk. The results suggest that a one standard deviation increase in inflation or GDP growth increases the likelihood of holding stocks by approximately 6–9% among people high in Conscientiousness or Openness, while decreasing it by about 6% for those scoring high in Neuroticism. To put it differently, for two otherwise similar individuals—one highly conscientious and one highly neurotic—an inflationary or expansionary shock widens their expected participation gap by roughly 12 percentage points.
In practice, financial advisors and asset managers can use these findings to integrate personality insights into client profiling, as doing so would allow for more personalized advice that accounts not only for risk tolerance but also for an individual’s temperament. And for individual investors, understanding one’s personality can help in recognizing when it is instincts, not data, that are steering financial decisions.
Recommended Citation
Nyamuronda, Tendai M., "When Markets Have Mood Swings: A Look at How Personality Shapes Investment Behavior in the Face of Economic Shocks" (2026). CMC Senior Theses. 4347.
https://scholarship.claremont.edu/cmc_theses/4347
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.
