Risk Preferences for Investment Decisions: Do Emotional and Cognitive Biases Matter?

Authors

  •  Anam Qamar Lecturer Department of Business Administration Jinnah University for Women, Karachi, Pakistan
  • Uzma Rasool Khan Assistant Professor, Department of Business Administration, Jinnah University for Women, Karachi
  •  Syed Aamir Alam Rizvi Research Scholar, Department of Business Management, Institute of Business Management
  •  Alizeh Khan Research Scholar, Department of Business Administration, Jinnah University for Women, Karachi
  • Ghania Saleem Research Scholars, Department of Business Administration, Jinnah University for Women, Karachi

Abstract

The purpose of this research study is to identify the impact of certain behavioral factors such as fear, herding, financial anxiety, loss aversion, and stress along with the mediating role of risk preference on retail investors' investment decisions in the context of Pakistan. The sample size of the study is 218 retail investors whereas the convenience sampling technique has been employed. Using a deductive approach data through a questionnaire survey and analyzed through PLS-SEM. The findings suggest the significant impact of fear, financial anxiety, herding, loss aversion, and stress on investment decisions whereas risk preference is found to have a significant mediating impact in terms of loss aversion, stress, financial anxiety, and herding on investment decisions Behavioral finance theories indicate that investors do not consistently exhibit rationality. Investors are advised to refrain from making judgements based on the perceived reliability of information derived from their social connections. Moreover, they should avoid swarming by relying on their expertise and intuition while making investing decisions.

Keywords: Behavioral factors, Risk Preferences. PLS-SEM, Retail Investors, Investment decision, Prospect Theory, Resilience Theory

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Published

2024-10-15

How to Cite

 Anam Qamar, Uzma Rasool Khan,  Syed Aamir Alam Rizvi,  Alizeh Khan, & Ghania Saleem. (2024). Risk Preferences for Investment Decisions: Do Emotional and Cognitive Biases Matter?. Bulletin of Management Review, 2(1), 16–38. Retrieved from https://bulletinofmanagement.com/index.php/Journal/article/view/51

Issue

Vol. 2 No. 1 (2024): Bulletin of Management Review (BMR)

Section

Articles