Discussion paper
DP19513 Grit, Preferences, and Investor Behavior
We examine whether grit affects the preferences and trading decisions of U.S investors. Grit is an important non-cognitive personality trait that is malleable and captures the sustained effort toward a goal despite setbacks. Using experiments formalized within prospect theory, we find that grit reduces loss aversion. Gritty investors are also more willing to exit losing investments and accumulate about 7% more wealth relative to control participants. Overall, our results suggest that grit affects the quality of investment decisions. Therefore, interventions cultivating grit could improve households' financial outcomes.
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