Investors’ financial aspirations excite investment decisions: current income, future inheritance expectations, and short-term and long-term decisions—The Matthew Effect in Pakistan’s emerging markets

Abstract

PurposeFollowing behavioral finance and monetary wisdom, the authors theorize: Decision-makers (investors) adopt deep-rooted personal values (the love-of-money attitudes/avaricious financial aspirations) as a lens to frame critical concerns (short-term and long-term investment decisions) in the immediate-proximal (current income) and distal-omnibus (future inheritance) contexts to maximize expected utility and ultimate serenity across context, people and time.Design/methodology/approachThe authors collected data from 277 active equity traders (professional money managers and individual investors) in Pakistan’s two most robust investment hubs—Karachi and Lahore. The authors measured their love-of-money attitude (avaricious monetary aspirations), short-term and long-term investment decisions and demographic variables and collected data during Pakistan's bear markets (Pakistan Stock Exchange, PSX-100).FindingsInvestors’ love of money relates to short-term and long-term decisions. However, these relationships are significant for money managers but non-significant for individual investors. Further, investors’ current income moderates this relationship for short-term investment decisions but not long-term decisions. The intensity of the aspirations-to-short-term investment relationship is much higher for investors with low-income levels than those with average and high-income levels. Future inheritance moderates the relationships between aspirations and short-term and long-term decisions. Regardless of their love-of-money orientations, investors with future inheritance have higher magnitudes of short-term and long-term investments than those without future inheritance. The intensity of the aspirations-to-investments relationship is more potent for investors without future inheritance than those with inheritance. Investors with low avaricious monetary aspirations and without inheritance expectations show the lowest short-term and long-term investment decisions. Investors' current income and future inheritance moderate the relationships between their love of money attitude and short-term and long-term decisions differently in Pakistan's bear markets.Practical implicationsThe authors help investors make financial decisions and help financial institutions, asset management companies, brokerage houses and investment banks identify marketing strategies and investor segmentation and provide individualized services.Originality/valueProfessional money managers have a stronger short-term orientation than individual investors. Lack of wealth (current income and future inheritance) motivates greedy investors to take more risks and become more vulnerable than non-greedy ones—investors’ financial resources and wealth matter. The Matthew Effect in investment decisions exists in Pakistan’s emerging economy.

Behavioral economics: who are the investors with the most sustainable stock happiness, and why? Low aspiration, external control, and country domicile may save your lives—monetary wisdom

“…Thus, the have-nots (investors with low income and without inheritance expectations) demonstrate a higher intensity between investors’ love of money and investment decisions than the haves. These findings support the Matthew Effect in investment decisions in emerging markets (Chaudary et al, 2022 ). China is also an emerging market.…”

“…The relationships between income and the love of money are negative among highly paid managers (Tang & Chiu, 2003 ), non-significant among people who change jobs frequently (Tang et al, 2006 ), and positive among underpaid professors (Luna-Arocas & Tang, 2015 ). Income and inheritance moderate the relationships between the love-of-money attitudes and short-term and long-term investment decisions (Chaudary et al, 2022 ). Spanish citizens experienced the dark side of the financial dream (the 30–44 age group, rural residents, and married), whereas others enjoyed the bright side (over-60 age group, unmarried, urban, and 18–29 age group) (Tang et al, 2014 ).…”

“…“The love of money results in objectification” (Wang & Krumhuber, 2017, p. 354). Money attitude impacts pay dissatisfaction (Luna-Arocas & Tang, 2015 ), pay differential disparity (Tang, 1996 ; Tang et al 2000a ), dishonest intentions (Gentina & Tang, 2018 ; Sardžoska & Tang, 2015 ; Tang et al, 2022 ), and short-term and long-term investment decisions (Chaudary et al, 2022 ). A high love-of-money score reveals one’s favorable attitude toward money.…”

Behavioral economics and monetary wisdom: A cross‐level analysis of monetary aspiration, pay (dis)satisfaction, risk perception, and corruption in 32 nations

“…For the past four decades, scholars worldwide have substantiated the notion of monetary wisdom, examining the relationships between this money construct and various positive and negative outcomes in more than 50 countries across six continents (Bloomberg, 2016; see Luna‐Arocas & Tang, 2015; Tang, Sutarso, Ansari, Lim, Teo, Arias‐Galicia, Garber, Chiu, Charles‐Pauvers, Luna‐Arocas, Vlerick, Akande, Allen, Al‐Zubaidi, Borg, Canova, et al, 2018). We include some selected countries and references, including under‐researched nations below: Canada, China, India, the Netherlands, the US (a 20‐country study, Bloomberg, 2016), the Czech Republic (Lemrová et al, 2014), Indonesia (Wicaksono & Urmsah, 2016), Kazakhstan, Kyrgyzstan, Uzbekistan (Tynalie & Erdener, 2019), Macedonia (Sardžoska & Tang, 2015), Pakistan (Chaudary et al, 2022), Sri Lanka (Wickramasinghe, 2022), Swaziland (Gbadamosi & Joubert, 2005), Thailand (Ariyabuddhiphongs & Hongladarom, 2011), Turkey (Süer et al, 2017), Uganda (Nkundabanyanga et al, 2011), UK (Wang & Krumhuber, 2017), Vietnam (Le & Kieu, 2019), and Zimbabwe (Mutipi, 2020).…”