Investigating The Roles Of Behavioral Finance, Risk Perception, And Personality In Stock Investment Choices

Abstract

The purpose of this study is to explore various interactional aspects of personality factors and behavior with finance, risk perception, and investment decision-making in the context of Pakistan Stock Exchange. The objective of this study is to establish the effects of psychological and cognitive characteristics on investing decisions through research on a diverse pool of investors. The study methodology includes measuring the test data by quantitative analytic tools, and the types of quantitative methods are self-reported data. This includes the use of regression and correlation techniques in order to analyze the different relationships of the variables. These findin[1]gs indicate that personality traits, behavioral finance, and risk perception have positive relationship to the investors’ decision-making in the present study, thereby increasing comprehensiveness of the model. However, behavioural finance has insignificant effect and risk perception and personality traits are signifnact effect on investors investment decisions. This study therefore expands existing literature by refining the theoretical developments on the complex association between psychological factors and investment decision-making. Hence, this research is in vain of the behavioral finance framework that has been proactively embraced in the existing fiscal literature. In addition, one of the main uses of the research findings is the provision of useful information that will assist investors, financial advisers, and legislators in their decision making with regards to the option portfolios depending on the personality traits and cognitive biases of the subjects. Thus, despite its shortcomings based on the cross-sectional research method employed and using the data collected through self-report questionnaires, this study fills a gap in the existing literature on investment decisions. It also points out the further research agenda, informing the necessity to examine these correlations in other conditions and employ more advanced methods.