If you're thinking about investing in risky assets like cryptocurrencies, you might want to consider the findings of a recent study by Tim Jaeger and Tina Steinorth from the University of Hamburg.
It looked at the investment behaviour of people who score highly on the "dark triad" personality traits of narcissism, psychopathy, and Machiavellianism.
Organisers asked participants to play a game where they were given a fixed amount of money to invest in either a safe asset or a risky asset.
The catch? The risky asset had a lower expected return than the safe asset.
For example, if you invested $1 in the risky asset, you had a 10% chance of winning $9 and a 90% chance of winning nothing.
Despite this, the study found that participants who scored high on the dark triad traits tended to invest 2% more of their money in the risky asset.
As equity Liberum strategist Joachim Klement writes in an op-ed, "narcissists are people who take unreasonable risks or break the rules to get better payoffs”.
He says it’s no surprise to me to see narcissists flock to high-risk investments even if the expected return is worse than a safer alternative.
He goes on to point out that many of the crypto promoters he's seen recently look like "extreme narcissists promoting risky investments that have a lower return than safer alternatives".