A recent Morningstar article outlines findings from a study by professors at Finland’s University of Oulu that focuses on how personality impacts investment style.

The article reports that due to Finland’s more lenient privacy laws, the research team was able to access individual equity holding information as well as investors’ psychological-testing records which outline the results from a test called the Temperament and Character Inventory (TCI). The TCI test, it explains, measures four personality traits, from which the study team focused on the following two:

Novelty-Seeking. The article says this applies to those who are “easily bored. In contrast, those with patience receive low scores” on this metric.

Reward-Dependence, which applies to those who “care greatly about what others think,” the article explains, adding, “Their actions are guided by the social cures that they receive.”

The study led the researchers to the following conclusions:

• Extravagant people—those with a propensity to splurge impulsively— favor large-cap growth stocks.
• Impulsive people—those willing to make decisions based on incomplete information— favor small-cap growth stocks.
• Sentimental people—who tend to be affected by emotional stimuli— favor small-cap value stocks.
• Social people—who want to join groups and feel attached to others— favor small-cap stocks of any sort, with a “modest value tilt.”

The article debates the findings related to sentimentality and sociability, arguing instead that growth-stock managers need to have faith in those companies to pay their higher prices, and that the faith leads to trust in the information coming from corporate executives. Value investors, on the other hand, are “market historians” who focus on how similar investments have fared in the past. The article argues that value investors are “far, far likelier than growth-stock managers to follow the academic literature” and are data-driven.

The article concludes with a “less theoretical” approach than that of the Finnish professors. “People are going to do what they wish to do. For most investors, the link between personality and investment style is immaterial—they will own a handful of broadly diversified funds, and thus their portfolios will not strongly tilt toward a particular style. Those of us who are more interested and involved as investors, however, will likely end up following our preferences.”