“…Neuroscience also backs the importance of regret in the decisions of human beings and the psychological area of regret in all types of decision-making is extensively investigated with empirical evidence in past studies (Camille, Coricelli, et al 2004, Bourgeois-Gironde 2010. Similarly, in neuroticism relationship of regret with individual investors' trading behavior is studied in past studies .e.g., (Fung and Durand 2014) report that if individual investors with high neuroticism invest in portfolios with certain outcomes that strengthen the negative emotions linked with trait; the actions they take in response to mitigate these disturbing incitements are mostly self-defeating and ineffective. As per (Pompian 2011) individual investors become victims of regret aversion bias and avoid investments either due to errors of commission or errors of omission.…”
Section: Regret Aversion and Individual Investor Trading Frequencymentioning
Purpose: This study aims to investigate the moderating effect of risk perception on the relationship among emotional biases (i.e., regret aversion and loss aversion) and the trading frequency of individual investors in the context of the Pakistan Stock Exchange (PSX).
Approach / Methodology: This study is conducted under the philosophical assumptions of the positivist paradigm and the approach is deductive. The convenience sampling technique is used for sample selection of registered individual investors on the database of PSX. This led the study towards designing a cross-sectional study. Furthermore, 384 questionnaires are used for the collection of primary data from a population of 0.22 million registered PSX individual investors. The direction and degree of relationship among variables of concern are analyzed by the multiple linear regression techniques. The structural Equation Modelling (SEM) technique is used for authentication of moderation results.
Findings: The results depict that regret aversion and loss aversion have statistically significant and negative impacts on individual investors’ trading frequency. Whereas, risk perception has an insignificant & positive impact on individual investors’ trading frequency. Moreover, risk perception is found to moderate the relationship between these two emotional behavioral biases.
Originality/Value: This current study is a pioneer in developing links between individual investors’ trading frequency, loss aversion, regret aversion, and risk perception. The article also contributes to the literature of behavioral finance, specifically while understanding the role of emotional biases in investment strategies. So, this article engenders the reader's thoughtfulness to find plausible explanations in minimizing the impact of emotional biases in trading frequency and decision-making of individual investors.
Implications: This study implies that emotional biases and risk perception cause and moderate the magnitude of the trading frequency of individual investors. The regulatory bodies such as the Securities and Exchange Commission of Pakistan (SECP) and PSX can launch training programs for individual investors to train them in coping up with such emotional biases and risk perception. This might result in the enhancement of the market capitalization of the stock market.
“…Neuroscience also backs the importance of regret in the decisions of human beings and the psychological area of regret in all types of decision-making is extensively investigated with empirical evidence in past studies (Camille, Coricelli, et al 2004, Bourgeois-Gironde 2010. Similarly, in neuroticism relationship of regret with individual investors' trading behavior is studied in past studies .e.g., (Fung and Durand 2014) report that if individual investors with high neuroticism invest in portfolios with certain outcomes that strengthen the negative emotions linked with trait; the actions they take in response to mitigate these disturbing incitements are mostly self-defeating and ineffective. As per (Pompian 2011) individual investors become victims of regret aversion bias and avoid investments either due to errors of commission or errors of omission.…”
Section: Regret Aversion and Individual Investor Trading Frequencymentioning
Purpose: This study aims to investigate the moderating effect of risk perception on the relationship among emotional biases (i.e., regret aversion and loss aversion) and the trading frequency of individual investors in the context of the Pakistan Stock Exchange (PSX).
Approach / Methodology: This study is conducted under the philosophical assumptions of the positivist paradigm and the approach is deductive. The convenience sampling technique is used for sample selection of registered individual investors on the database of PSX. This led the study towards designing a cross-sectional study. Furthermore, 384 questionnaires are used for the collection of primary data from a population of 0.22 million registered PSX individual investors. The direction and degree of relationship among variables of concern are analyzed by the multiple linear regression techniques. The structural Equation Modelling (SEM) technique is used for authentication of moderation results.
Findings: The results depict that regret aversion and loss aversion have statistically significant and negative impacts on individual investors’ trading frequency. Whereas, risk perception has an insignificant & positive impact on individual investors’ trading frequency. Moreover, risk perception is found to moderate the relationship between these two emotional behavioral biases.
Originality/Value: This current study is a pioneer in developing links between individual investors’ trading frequency, loss aversion, regret aversion, and risk perception. The article also contributes to the literature of behavioral finance, specifically while understanding the role of emotional biases in investment strategies. So, this article engenders the reader's thoughtfulness to find plausible explanations in minimizing the impact of emotional biases in trading frequency and decision-making of individual investors.
Implications: This study implies that emotional biases and risk perception cause and moderate the magnitude of the trading frequency of individual investors. The regulatory bodies such as the Securities and Exchange Commission of Pakistan (SECP) and PSX can launch training programs for individual investors to train them in coping up with such emotional biases and risk perception. This might result in the enhancement of the market capitalization of the stock market.
“…Other researchers support the view that sociological and demographic factors are also important to explain investor behaviour. 7,8 Though some researchers have studied the impacts of other factors such as gender or age on investment behaviour, these studies only explored the influences with regard to investor behaviour but did not discuss any findings about the financial decision-making process of investors or predict their preference on financial products. For example, Yang 20 investigated, through case studies, the influence of both gender and age differences towards financial investment behaviour in terms of overconfidence, account-open time and trade frequency.…”
Section: Overview Of Behavioural Financementioning
confidence: 99%
“…7 Moreover, demographic factors such as age and gender are also important in explaining investor behaviour. 8 Behavioural finance seems to explain reality and to provide a better framework in the way the investors behave. It is crucial to take psychological, sociological and demographic factors into account to explore the major attributes of how investors behave.…”
The financial industry plays a significant role in Mainland Chinese and Hong Kong economies and has aroused increasing managerial and academic interests in recent decades. Individual investors are becoming more cautious towards financial investment which makes it difficult for financial service providers to formulate marketing strategies after experiencing several financial crises. Prior research has suggested that financial investment behaviour would be affected by various factors, including the demographic characteristics of individuals; however, they seldom study the differences in financial investment behaviour between Mainland Chinese and Hong Kong investors or provide an easy-to-use approach for practical usage. This exploratory study aims at filling the identified research gap by proposing linear regression models of the financial investment behaviour of Mainland Chinese and Hong Kong investors. Based on the results of regression analyses, (i) there exist significant differences in financial investment behaviour between Mainland Chinese and Hong Kong investors, and (ii) investors' psychological, sociological and demographic factors are significant predictors of their investment behaviour/preferences. Thus, financial service providers are able to predict the investment behaviour/preference of its customers and formulate marketing and strategic decisions, such as customizing the financial investment portfolio of customers on the basis of regression models built.
“…There have also been important summaries by groups working in the area. In one pioneering study, Fung and Durand () noted that personality is clearly related to both risk‐taking and over‐confidence, both of which are extremely important inputs when making financial decisions. They argued that (p. 112):First, personality matters when choosing portfolios and is something investors and their advisers should consider.…”
Section: Personality and Financial Decision Makingmentioning
This article attempts a comprehensive and multi-disciplinary review of a scattered literature on the characteristics of successful investment managers. It considers nonpeer reviewed papers and reports written by organizations and human resource experts but also empirical papers from those in disciplines such as business studies, economics, finance, psychology, and psychiatry. It focuses on three issues: Ability, personality, and motivation. Most of the studies have concentrated on motivation and various themes are apparent suggesting that it is possible to profile successful investment managers.
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