Emotional Intelligence and risk taking in investment decision-making

Previous work on investment decision-making suggested that emotions prevent investors from taking risks and from investing in a rational way, whereas other work found that there is great variability in people’s ability to manage and use emotional feedbacks. We hypothesized that people with high trait emotional intelligence should be more willing, than people with low trait emotional intelligence, to accept risks when making an investment. Data supported a model in which trait emotional intelligence predicted willingness to invest both when the expected value is positive and when it is negative. The effect of trait emotional intelligence was significant even controlling for other variables, like attitude toward economic risk and money attitude. We believe that these results help improving the understanding of how emotions influence investors’ behavior and show that their role is not always detrimental but depends on the interplay between individual differences and situational factors.