Psychopathic Theory

The names Ted Bundy, Charles Manson, or Jeffrey Dahmer typically come to mind with the thought of psychopaths, but psychopaths are not always violent or incarcerated. In fact, some psychopaths may be controlling your money, the so-called “functional” psychopath. Psychopaths make up about 1 percent of the general population, (Hare, 1991) but research shows that individuals who work in high levels of business and are in charge of company decision making are significantly more likely to be psychopaths than the general public, which makes it important to understand how they make decisions (Babiak et al. 2010). Babiak and Hare (2006) find that about four percent of businessmen are psychopaths, which is four times the normal incidence. Robert Hare, …show more content…
Additionally, psychopathic traits are examined how they relate to financial risk preferences to address the link between psychopathic traits and financial risk preferences. To knowledge, no study has made this link between psychopathic traits and financial risk preferences. This paper will contribute to the behavioral finance literature by showing how psychopathy and its many traits contribute to financial risk. The majority of studies examining the role of psychopathy on decision making and behavior solely use diagnosed psychopaths in prison. The almost limited use of incarcerated samples provides a serious limitation on psychopathy research, therefore this study will contribute to the literature by using a non-incarcerated sample to determine the financial decision making of individuals likely to work in the business industry. Individuals risk preferences play a crucial role in making their financial decisions, because almost every decision made involves risk, especially in the finance industry. Shiv et al (2005) show that individuals who are loss averse earn less money than individuals who are not. Similarly, Fellner and Sutter (2009) show that individuals who exhibit less myopic loss aversion earn higher investments. Therefore these particular studies shed light on how risk preferences influence financial decision making and performance. Another important contribution of this paper is the use of using psychopathy traits in training. The company MarketPsych, provides psychological and behavioral finance training to finance professionals, showing that human psychology plays an important role in financial decision making, and this paper demonstrates that including psychopathy traits may enhance the ability of using psychology to teach individuals how to have higher