The influence of dispositional affect and cognition on venture investment portfolio concentration

We explore how an investor's dispositional affect and cognitive style influence venture investment portfolio concentration. Based on a field study using a sample of 128 judges from a business plan competition, we find that high positive affectivity investors construct more concentrated investment portfolios than their low positive affectivity counterparts, whereas high negative affectivity investors construct more diversified investment portfolios than their low negative affectivity counterparts. Further, investors who rely on analytical decision making display a weaker relationship between negative affectivity and investment diversification whereas investors who rely on emotion-based decision making display a stronger relationship between positive affectivity and investment concentration.

► We explore how dispositional affect and cognitive style affect concentration of venture investment portfolio.
► High (low) positive affectivity investors construct a more (less) concentrated portfolio.
► High (low) negative affectivity investors construct a more (less) diversified portfolio.
► These relationships are moderated by need for cognition and emotion-based decision making.