The influence of personality traits on investment decision-making: a moderated mediation approach

Abstract

PurposeBehavioral finance proposes that psychology of the individual plays a vital role in investment decisions. Therefore, this study aims to examine the influence of one of the important disciplines of psychology, i.e. personality on investment decision-making by incorporating financial satisfaction as an intervening variable and gender as a moderator.Design/methodology/approachThe data of 406 valid responses were collected through structured questionnaires from individual investors of Indian stock market and analyzed using structural equation modeling. Several invariance tests were also conducted to perform the multigroup analysis of gender on the mediated model.FindingsThe results revealed that extraversion, agreeableness, conscientiousness and neuroticism significantly influence investment decision-making through financial satisfaction. While financial satisfaction significantly mediates the indirect relationships between personality traits and investment decision-making for both males and females, no significant differences among males and females were found in the mediated model.Research limitations/implicationsThe current study covers a limited geographical area of North India. In addition to this, it is cross-sectional in nature and incorporates only limited factors for predicting investment decisions.Practical implicationsThe study possesses numerous significant implications for financial practitioners, advisors, investors, academicians and researchers in the field of behavioral finance.Originality/valueThis study suggests a moderated mediation approach, which incorporates financial satisfaction as a mediator and gender as a moderator. To the best of the authors’ knowledge, so far, no study has been conducted in this context, and it will enhance the understanding of investment decisions of individual investors.

Overconfidence Bias in Investment Decisions on Indonesian Stock Market

“…In addition, this research showed the same effect for both men and women in moderating effect on personality traits (neuroticism, conscientiousness, openness) with overconfidence bias, it means, when men and women are under pressure, it can trigger their brains to think irrationally, so they tend to have an overconfidence bias when making investment decisions (Arifin, 2019;Sachdeva & Lehal, 2023).…”

“…The majority of respondents were spread across the Greater Jakarta area at 74.5%, male at 53.6%, age range 21 -30 years at 49.9%, with a Bachelor's educational background as much as 65.6%, with private/government employee amount to 55.9%, and investment duration for 1-3 years as much as 39.8%, and making investment income as the main income 52.2%. The indicators for the variables neuroticism (NEU), openness (OPE), conscientiousness (CON), and overconfidence (OC) are presented in the form of questions to respondents, which can be seen in table 1 (Baker et al, 2021;Sachdeva & Lehal, 2023).…”

Personality traits and investment decision

“…Similarly, Zeb et al (2020) found Neuroticism and Extraversion have significant effect on investment decision. Sachdeva and Lehal (2023) revealed that extraversion, agreeableness, conscientiousness and neuroticism significantly influence investment decision-making Among the traits, prior studies mainly explained that extraversion and openness to experience positively affect making risky investment decisions as contrasting to neuroticism, agreeableness, and consciousness (Mayfield et al, 2008;McCrae & Costa, 1997). Conscientiousness and Openness to Experience and Extraversion were directly impacted the positive mood; then Agreeableness and Neuroticism were directly impacted a negative mood (Phung, Mai & Nguyen, 2016).…”

Analisis Pengaruh Ketahanan Emosional, dalam Pengambilan Keputusan Investasi di Komunitas Investor Muda di Indonesia

“…Ketahanan emosional, yang ditandai dengan kemampuan untuk mengatasi stres, beradaptasi dengan keadaan yang berubah-ubah, dan mempertahankan kesejahteraan psikologis, muncul sebagai faktor penting dalam menavigasi kompleksitas pasar keuangan (Herliana et al, 2023). Dalam konteks pengambilan keputusan investasi, individu dengan ketahanan emosional yang lebih tinggi dianggap memiliki kapasitas yang lebih besar untuk menahan fluktuasi pasar, pulih dari kemunduran, dan terlibat dalam proses pengambilan keputusan yang lebih rasional dan strategis (Sachdeva & Lehal, 2023). Penelitian di bidang keuangan perilaku menggarisbawahi dampak emosi pada pilihan keuangan, mengungkapkan bahwa individu sering menyimpang dari pengambilan keputusan yang rasional karena bias emosional (Milovidov, 2023).…”