Influence of investor sentiment and its antecedent on investment decision-making using partial least square technique

Abstract

Purpose The purpose of this paper is to determine whether individual investor sentiment and its factors influence investment decision-making behavior in the Indian stock market. The study contributes to the novel conceptual framework that integrates the impact of investor sentiment and outlines the role of its factors (herding, media factor, advocate recommendation and social interaction) during the investment decision-making process. Design/methodology/approach In this paper, data were collected using a structured questionnaire survey from Indian individual investors. It uses self-reported sources of information collected via a survey of individual investors and estimated the linkage via path modeling. The collected data were analyzed using partial least square structural equation modeling to examine the relationship between the construct, namely, herding, media, advocate recommendation and social interaction with investor sentiment and investment decision-making. Findings The study shows that herding, media factor, advocate recommendation and social interaction significantly and positively influence the investor sentiment. Among all the factors, social interaction has the lowest influence on investor sentiment. The study also reveals that investor sentiment has a positive impact on investment decision-making. Practical implications The study provides valuable insights for the individual investors, financial advisors, policymakers and other stakeholders. Knowledge of behavioral finance would enhance the decision-making capabilities of individual investors in the stock market. Thus, the study calls for the need to increase awareness among Indian investors about behavioral finance and its usefulness in investment decision-making. The paper also sheds light upon the influence of investor sentiment and its antecedents on investment decision-making. The study confirms that the investor relies on their sentiment while making investment decisions. Hence, the stakeholders in the stock market should focus on investor sentiment and other psychological aspects of individual investors as well. Originality/value There are very few studies that deal with the behavioral aspects of individual investors in an emerging market context. The study mainly focuses on the antecedent of investor sentiment and its influence on investment decision-making in the Indian stock market. To the best of authors’ knowledge, the present study unique nature that examines the impact of the antecedent of investor sentiment which was not explored in the Indian context and investment decision-making of individual investors.

Determinants of Investment Decision in Cryptocurrency: Evidence from Indonesian Investors

“…Among all these factors, social interaction has the lowest effect on investor sentiment. The study also revealed that investor sentiment positively impacts investment decision-making [9].…”

“…Awareness can be defined as a financial awareness as "the ability to make sound judgments and to make effective decisions regarding the use and management of money" [9]. Awareness exists to share information or ideas through the internet, media, social interactions, recommendations from friends, relatives, or intermediaries.…”

“…The third variable, the Subjective norms variable, is an individual's perception of social pressure to perform or not to perform a behavior [12]. The last variable is awareness which can define as financial awareness as "the ability to make appropriate judgments and to make effective decisions regarding the use and management of money" [9], or ideas via the internet, media, social interactions, recommendations from friends, relatives, or intermediaries.…”

Individual Investors Trading Behavior in Indonesia Stock Exchange and the Covid-19

“…[41][44]. Fifth, future research can be considered the effects of demographic characteristics such as age, level of education, experience, gender in investors in determining investment decisions [45].…”

Investor sentiment and accounting conservatism: evidence from Iran

“…When investors make decisions, their emotions influence their decision (Ángeles L opez-Cabarcos et al, 2020). Henry (2008) examining the role of emotions in investors' decision-making process, they found that tone of communication affects investors 'decisions .In research of Haritha and Uchil (2020), the effect of investor sentiment on their decisions was examined. Their research results showed that herding, media factor, advocate recommendation and social interaction significantly and positively influence the investor sentiment.…”