Behavioral biases and investors’ decision-making: The moderating role of socio-demographic variables

Abstract

The purpose of this study is to investigate the impact of behavioral biases on investment decision, and the interaction effect of socio-demographic characteristics. Data were collected from a sample of 179 individual investors in the Pakistan Stock Exchange (PSX). The authors conducted a hierarchical regression analysis to test the moderating effect of socio-demographic variables on behavioral biases. The results show that behavioral biases have a significant impact on investors’ decision-making. Moreover, socio-demographic variables (education, occupation and marital status) moderate the relationship between emotional biases and investors’ decision-making. This study provides a new addition to prior literature by investigating the impact of behavioral biases on investors’ decision-making, and the interaction effect of socio-demographic characteristics.

Effect of Socio-demographic Factors (Age, Occupation and Education) on Behavioral Biases of Individual Investors’ Decision-making Evidence from The Colombo Stock Exchange

“…This is because, investors assume that the trustworthiness and helpfulness of information generated through herding is extremely high. Further, Katper et. al.…”

“…Among different studies on investigating the effect of socio-demographic factors, Katper et al (2019) investigated the interaction effect of occupation on investors' decision-making in the Pakistan Stock Exchange. They finally identified that representativeness bias interacting with occupation shows an inverse effect on investors' decision.…”

“…Beatrice, Murhadi and Herlambang (2021) analyzed the effect of age, education, occupation, income and investment experience. Similarly, Katper, Azam, Karin and Zia (2019) investigated the moderating effect of education and occupation in their study. Siraji (2019) also identified the effect of age on behavioral biases in Sri Lankan context.…”

“…has utilized convenience sampling technique for collecting data from individual investors of CSE Katper et al (2019…”

“…), Sindhu, et al (2014 also utilized the same technique.Educationeliminated to enhance the accuracy of the study. All scaled items were adapted from previous studies,Katper et al (2019) and Chithra and Jayashree (2014). SMART-PLS was used to analyze data due to the smaller sample size,Hair, Black, Babin, Anderson and Tatham (2010).…”