Prediction Based on Entrepreneurship-Prone Personality Profiles: Sometimes Worse Than the Toss of a Coin

40 Pages Posted: 21 Oct 2018

See all articles by Alexander Konon

Alexander Konon

German Institute for Economic Research (DIW Berlin)

Alexander Kritikos

Europa-Universitaet Viadrina - Fakultat fur Wirtschaftswissenschaften; German Institute for Economic Research (DIW Berlin); IZA Institute of Labor Economics

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Date Written: October 1, 2018

Abstract

The human personality predicts a wide range of activities and occupational choices—from musical sophistication to entrepreneurial careers. However, which method should be applied if information on personality traits is used for prediction and advice? In psychological research, group profiles are widely employed. In this contribution, we examine the performance of profiles using the example of career prediction and advice, involving a comparison of average trait scores of successful entrepreneurs with the traits of potential entrepreneurs. Based on a simple theoretical model estimated with GSOEP data and analyzed with Monte Carlo methods, we show, for the first time, that the choice of the comparison method matters substantially. We reveal that under certain conditions the performance of average profiles is inferior to the tossing of a coin. Alternative methods, such as directly estimating success probabilities, deliver better performance and are more robust.

Keywords: Advice, personality, entrepreneurship, profiles

JEL Classification: C15, D81, L26

Suggested Citation

Konon, Alexander and Kritikos, Alexander S., Prediction Based on Entrepreneurship-Prone Personality Profiles: Sometimes Worse Than the Toss of a Coin (October 1, 2018). DIW Berlin Discussion Paper No. 1763, Available at SSRN: https://ssrn.com/abstract=3269157 or http://dx.doi.org/10.2139/ssrn.3269157

Alexander Konon

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Alexander S. Kritikos (Contact Author)

Europa-Universitaet Viadrina - Fakultat fur Wirtschaftswissenschaften ( email )

15230 Frankfurt (Oder)
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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