Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/185340 
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers No. 11880
Publisher: 
Institute of Labor Economics (IZA), Bonn
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 aver-age profiles is inferior to the tossing of a coin. Alternative methods, such as directly estimating success probabilities, deliver better performance and are more robust.
Subjects: 
advice
personality
entrepreneurship
profiles
JEL: 
C15
D81
L26
Document Type: 
Working Paper

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