An Investigation of Financial Investment Intention using Covariance-Based Structural Equation Modelling

Abstract

Decision-making process about financial investment is complicated. Relying on modern financial theory to explain behaviours of individual investors is inadequate because it focuses on the objective risk as the determinant for making investment decisions under the assumption that individuals are rational. The current study, which was built from the financial, sociological and psychological perspectives, investigated the predictors of risk perception and determined the association of risk perception and attitude toward financial investment intention. This study served the purpose of unravelling the complexity of the financial investment decision-making process among individuals. Design/methodology/approach: The research framework was based on Perception Formation Model (PFM) with further support from the Theory of Planned Behaviour, decision making models under risk, and knowledge-attitudebehaviour model. Purposive-sampling method was adopted. The dataset, which consisted a total of 492 responses from income earners below the age of prime savings years were entered for analysis. Twelve hypotheses were tested using the Analysis of Moment Structures (AMOS) statistical software. Findings: Measurement-model assessment revealed the data fitted well to the research model Results from the structural-model assessment revealed subjective knowledge, peer influence, internet influence, and risk propensity had a significant relationship with favourable risk perception. Consistent with the PFM proposition, it was found favourable risk perception significantly related to higher intention toward financial investment. Research limitations/implications: The resultant outcomes strengthen the understanding of how financial investment decision is performed by individuals, which is crucial in the personal-finance industry, especially in promoting a long-term and meaningful client-advisor relationship. Interestingly, objective knowledge, which measured the actual level of financial knowledge was found to be insignificantly associated with risk perception and intention toward financial investment. As a sizeable financial literature posited financial knowledge has impact on decision-making process, future study could perhaps examine whether objective knowledge could contextually alter the relationship between predictors and the endogenous variable. Originality/value: The study has successfully identified several predictors for risk perception about financial investment and provided an empirical link for knowledge-perception-attitude-intention, thus, enriching the behavioural finance literature. The research model was robust as it was formulated based on the three major pillars of behavioral finance, namely: financial, sociological, and psychological perspectives.

The Influence of Perceptions and Lifestyle of College Students on Investment Interest in Islamic Mutual Funds During the Covid-19 Pandemic

“…The results of SEM analysis show that there is a direct and indirect effect on the perception variable on Islamic mutual fund investment interest through lifestyle variables. The results of this study are in line with previous research conducted by Lim et al (2020), there is a significant influence of perception with financial investment interest, this influence illustrates individual perceptions of risk and return and prospects of a financial investment product can be a consideration in determining the right investment. Based on the research results, students who have the perception that Islamic mutual fund investment during the Covid-19 pandemic is the right choice have a fairly high investment interest.…”

Are there possible issues that we overlook when selecting green infrastructure?

“…The theoretical framework of this study was based on the perception formation model proposed by Litterer [45] , which has been applied to study many topics such as environmentally safe products [46] , life insurance [47] , and financial investment [48] . This model consists of three components: one perception variable, one formation variable, and some explanatory variables.…”

Strategies for a Circular Economy in the Construction and Demolition Sector: Identifying the Factors Affecting the Recommendation of Recycled Concrete

“…Within the frame of this case study, beliefs considered can relate to the perceived environmental impact associated with RC, and to the technical properties (durability) of RC (see for instance [66,67] for perception of relative benefits and costs in the context of waste management infrastructure use). Risk taking [68] and knowledge can be linked to shaping attitude [69]. It is expected that individuals who are risk takers would be more likely to recommend a new material as compared to individuals that are less likely or less willing to take a risk.…”