Post-COVID-19 investor psychology and individual investment decision: A moderating role of information availability

Abstract

This study aims to investigate the influence of psychological biases on the investment decision of Chinese individual investors after the pandemic of COVID-19 with a moderating role of information availability. A cross-sectional method with a quantitative research approach was employed to investigate the hypothesized relationships among variables. The snowball sampling technique was applied to collect the data through a survey questionnaire from individual investors investing in the Chinese stock market. Smart-PLS statistical software was used to analyze the data and for the estimation of hypotheses. Results indicated that overconfidence, representative bias, and anchoring bias have a significant and positive influence on investment decisions during the post-Covid-19 pandemic; however, the availability bias has insignificant and negative effects on the investment decision during the post-COVID-19 pandemic. Moreover, findings indicated that information availability has a significant moderating role in the relationship of psychological biases with the investment decision during the post-COVID-19 pandemic. This study contributes to the body of knowledge regarding behavior finance, psychological biases, and investment decision in emerging stock markets. The findings of the present study improve the understanding that how investors’ psychology affects their investment decisions.

The mediating effect of the COVID-19 pandemic on heuristic techniques and cognitive biases on investment decision-making

“…US investors' technical analysis valuation investment decision-making during the COVID-19 pandemic era was mostly based on unintentional errors in their worldview and calculated guesses related to prior knowledge. The findings of this study contradicted the studies done in China by Song et al (2021) and Jan et al (2022) that showed that the pandemic outbreak hurt investors' confidence in investment decision-making. The US investors were better positioned based on their experience and market information availability.…”

“…The research adopted a causal research design and mediation analysis to explain how or why the COVID-19 pandemic accounted for the association between heuristic techniques and cognitive biases in investment decision-making in the United States of America. The research used the snowball sampling technique as in Jan et al (2022) study in China to recruit investors who directly or indirectly traded on the U.S. stock exchange and authorized a buy or sell stock transaction between March 11, 2 020, and May 5, 2023, when the World Health Organization (WHO) declared COVID-19 a pandemic. To detect .8 power for full mediation and the partial-mediation requirements effect as Baron and Kenny (1986) study, this research used 500 sample size (Fritz & MacKinnon, 2007).…”

“…During the COVID-19 period, the stock markets experienced rapid volatility in response to investors' unpredictable emotions (Jan, Jain, Li, Sattar, & Tongkachok, 2022). Due to this situation, this paper explores the knowledge gap and seeks an explanation of how or why the COVID-19 pandemic influenced investors' investment decision-making as correlated to the existing heuristic techniques and cognitive biases.…”

“…A correlational study by Jan et al (2022) in China showed that availability bias had a negative and significant adverse consequence on investment decisions during the post -COVID-19 pandemic, whereas overconfidence, representational bias, and anchoring bias had significant and positive influences. The correlational results satisfy Baron and Kenny (1986) rule of thumb, which requires the association of the variables to be established before conducting a mediation analysis.…”

“…The correlational results satisfy Baron and Kenny (1986) rule of thumb, which requires the association of the variables to be established before conducting a mediation analysis. It must be noted that the study by Jan et al (2022) only focused on relationships and Chinese investors, and this study used investors in the United States of America to determine the mediating role of the COVID-19 pandemic on the association between heuristic techniques and cognitive biases on investment decision-making.…”