Investor personality as a predictor of investment intention – mediating role of overconfidence bias and financial literacy

Abstract

PurposeThe purpose of this study is to examine the role of personality traits (PTs) of individual investors on their investment intention (II). Further, to study the mediating role of overconfidence (OC) bias and financial literacy (FL) on the relationship between PTs and II.Design/methodology/approachThe present study uses the quantitative approach for the data collection from the sample of 327 Indian investors investing in the stock market. The questionnaire was divided into segments to assess the investor’s PTs, OC, FL and II. The PT has been measured using the Big Five Personality Traits. Confirmatory factor analysis was used to test the reliability and validity of the constructs. The hypothesis was tested using structural equation modeling.FindingsFindings of the study show that the PTs of an individual investor are associated with FL and II but insignificant with OC bias. Further, the FL and OC bias have a positive and significant influence on II. In addition, the mediation analysis showed that FL partly mediates the relationship between PTs and II.Practical implicationsThe present study is helpful for financial companies, government, personal finance advisors and individual investors; they can keep in mind the behavior-related traits that can influence the investment decisions and design the portfolio accordingly. The policy-makers can implement programs on FL to enhance investment decisions in India.Originality/valueThis paper is unique that covers the mediating role of psychological bias, i.e. OC bias and FL, between the PTs and II of an Indian investor.

Moderating role of millennials' financial literacy on the relationship between risk tolerance and risky investment behavior: evidence from India

“…Next, millennials' FL (β 5 À0.260; p-value 5 0.027) had a significant negative impact on their RII; thus, H2 was accepted. Jain et al (2022) reported a positive relationship between FL and Investment Intention, while the study found evidence that FL has a negative influence on RII. This makes sense, as individuals equipped with FL understand the importance of managing finances and investment, making the investment decision-making process more complicated.…”

“…An individual who has over-evaluated their financial knowledge is likely to engage in risky investment decisions, believing that they have a good grasp of financial issues (Khan et al, 2017). The literature points out that FL significantly mediates the association between personality traits and investment intention (Jain et al, 2022), financial education and risky asset holdings (Zhu and Xiao, 2022), and moderates the association between personality traits and risk behavior (Akhtar and Malik, 2023), locus of control and RII (Aydemir and Aren, 2017) and risk aversion and RII (Aren and Aydemir, 2015). The lack of adequate literature illustrating the moderating effect of FL on the association between risk tolerance and RII from the perspective of millennial investors acts as a gap for this study.…”

“…However, Indian financial markets are still underdeveloped due to high transaction costs and financial illiteracy (Schuetz and Venkatesh, 2020). Understanding its participants can boost the growth of the financial industry/sector (Jain et al ., 2022). Despite the fact that about 40% of the latest entrants to the financial market are investors in the age group of 23–40 years (Neufeld, 2021), hardly any studies in the literature have focused on analyzing this generation's investment intention.…”

The Influence of Investment On The Economy In Riau Province Indonesia

“…Investment is an activity of placing funds in one or more types of assets during a certain period to obtain income or increase the value of investments in the future to meet the needs and desires of investors in the hope of providing benefits to them or benefiting the public. Taken must have risks, so invests (Jain et al, 2022). Therefore, it is very necessary to do management in dealing with risk.…”

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“…The second contribution, practically, is that this study reflects a basic concept of teaching related to the knowledge acquisition dimension that investment institutions and securities companies can embrace. In conclusion, involved institutions, such as securities and investment institutions, are responsible for developing investors' skills (Adil et al, 2022;Jain et al, 2022;Meoli et al, 2022). Thus, this study result can be applied to various teaching concept programs, for example, seminars, investment classes, etc.…”