Impact of Emotional Intelligence and Behavioral Biases on Trading Decisions

Abstract

One of the most important factors in an investor's personal financial decision-making process is their trading decision. Emotional intelligence appears to influence investors' behavioural biases, stock preferences, and risk tolerance, according to a number of studies. The underlying mechanism through which emotional intelligence is related to investors' trading behaviour has not yet been studied, according to academics. In order to determine whether optimism bias serves as a link between investors' emotional intelligence and trading behaviour, a mediational study was conducted. The study's findings indicated that individuals with poor emotional intelligence engage in stock trading at a higher rate than individuals with high emotional intelligence. Additionally, it was discovered that optimism bias acted as a mediator between emotional intelligence and investors' trading decisions.