Behavioral finance factors and investment decisions: A mediating role of risk perception
AbstractModern finance theory assumes that the stock market is efficient, and stock prices reflect all available information. However, behavioral finance theory argues that stock prices can be influenced by psychological and emotional factors. This study aims to examine the impact of behavioral fina...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2023-06-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2023.2239032 |
| _version_ | 1797772145245290496 |
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| author | Bashar Yaser Almansour Sabri Elkrghli Ammar Yaser Almansour |
| author_facet | Bashar Yaser Almansour Sabri Elkrghli Ammar Yaser Almansour |
| author_sort | Bashar Yaser Almansour |
| collection | DOAJ |
| description | AbstractModern finance theory assumes that the stock market is efficient, and stock prices reflect all available information. However, behavioral finance theory argues that stock prices can be influenced by psychological and emotional factors. This study aims to examine the impact of behavioral finance factors on investment decisions in the Saudi equity markets through the mediating variable of risk perception. An online questionnaire was distributed to 150 individual investors, out of which 134 were returned and ready for analysis. The data is analyzed using structural equation modeling (SEM). The results show that herding, disposition effect, and blue chip bias have a significant positive impact on risk perception. Overconfidence has a significant positive effect only on investment decision making, but not on risk perception. Risk perception is found to be significantly positively related to investment decision making. All four behavioral finance factors have a significant positive indirect effect on investment decision making through risk perception. This study is conducted in a particular cultural context, namely Saudi Arabia, and may not be generalizable to other cultural contexts. Moreover, this study focused only on four behavioral finance factors, and there may be other factors that could impact risk perception and investment decision making. The results highlight the importance of considering an individual’s perception of risk when making investment decisions, as it can significantly impact their willingness to take risks and ultimately affect the performance of their investment portfolio. The results suggest the need for investors to consider their behavioral biases and for advisors and policymakers to develop strategies to mitigate their impact. |
| first_indexed | 2024-03-12T21:47:48Z |
| format | Article |
| id | doaj.art-f54159dc3c2d468c87e507e10c6ef4b3 |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-03-12T21:47:48Z |
| publishDate | 2023-06-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-f54159dc3c2d468c87e507e10c6ef4b32023-07-26T10:21:46ZengTaylor & Francis GroupCogent Economics & Finance2332-20392023-06-0111210.1080/23322039.2023.2239032Behavioral finance factors and investment decisions: A mediating role of risk perceptionBashar Yaser Almansour0Sabri Elkrghli1Ammar Yaser Almansour2Finance, Faculty of Business Administration, Libyan International Medical University, Benghazi, LibyaMarketing, Faculty of Business Administration, Libyan International Medical University, Benghazi, LibyaFinance, Faculty of Business, Amman Arab University, Amman, JordanAbstractModern finance theory assumes that the stock market is efficient, and stock prices reflect all available information. However, behavioral finance theory argues that stock prices can be influenced by psychological and emotional factors. This study aims to examine the impact of behavioral finance factors on investment decisions in the Saudi equity markets through the mediating variable of risk perception. An online questionnaire was distributed to 150 individual investors, out of which 134 were returned and ready for analysis. The data is analyzed using structural equation modeling (SEM). The results show that herding, disposition effect, and blue chip bias have a significant positive impact on risk perception. Overconfidence has a significant positive effect only on investment decision making, but not on risk perception. Risk perception is found to be significantly positively related to investment decision making. All four behavioral finance factors have a significant positive indirect effect on investment decision making through risk perception. This study is conducted in a particular cultural context, namely Saudi Arabia, and may not be generalizable to other cultural contexts. Moreover, this study focused only on four behavioral finance factors, and there may be other factors that could impact risk perception and investment decision making. The results highlight the importance of considering an individual’s perception of risk when making investment decisions, as it can significantly impact their willingness to take risks and ultimately affect the performance of their investment portfolio. The results suggest the need for investors to consider their behavioral biases and for advisors and policymakers to develop strategies to mitigate their impact.https://www.tandfonline.com/doi/10.1080/23322039.2023.2239032behavior financerisk perceptioninvestment decisionsG40G41D91 |
| spellingShingle | Bashar Yaser Almansour Sabri Elkrghli Ammar Yaser Almansour Behavioral finance factors and investment decisions: A mediating role of risk perception Cogent Economics & Finance behavior finance risk perception investment decisions G40 G41 D91 |
| title | Behavioral finance factors and investment decisions: A mediating role of risk perception |
| title_full | Behavioral finance factors and investment decisions: A mediating role of risk perception |
| title_fullStr | Behavioral finance factors and investment decisions: A mediating role of risk perception |
| title_full_unstemmed | Behavioral finance factors and investment decisions: A mediating role of risk perception |
| title_short | Behavioral finance factors and investment decisions: A mediating role of risk perception |
| title_sort | behavioral finance factors and investment decisions a mediating role of risk perception |
| topic | behavior finance risk perception investment decisions G40 G41 D91 |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2023.2239032 |
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