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Individual Wealth Management: Does Self-esteem Matter?
Journal of Applied Business and Economics (2009)
  • Swarn Chatterjee, University of Georgia
  • Michael S. Finke, Texas Tech University
  • Nathaniel J. Harness

Self-esteem measures confidence in one’s abilities. Prior literature has shown that higher self-esteem can also affect individual financial decision making through an increased willingness to invest in risky assets and motivation to enhance self image through wealth accumulation. However, self-esteem can also lead to wealth-destroying investment behaviors due to overconfidence and an unwillingness to accept inevitable losses. Using the Rosenberg Self-esteem Scale included in the National Longitudinal Survey of Youth, we model wealth and portfolio allocation as a function of self-esteem, socioeconomic and demographic variables. Self-esteem is positively associated with an increase in net worth between 1994 and 2004, and with the proportion of a household portfolio held in investment assets. This study adds to the literature on psychological determinants of optimal household portfolio allocation by providing evidence that the positive effects of self-esteem outweigh the negative financial behaviors identified in prior literature.

  • Self-esteem,
  • Portfolio Choice,
  • Individual Wealth
Publication Date
Citation Information
Swarn Chatterjee, Michael S. Finke and Nathaniel J. Harness. "Individual Wealth Management: Does Self-esteem Matter?" Journal of Applied Business and Economics Vol. 10 Iss. 2 (2009)
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