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

Jain, Riidhi; Sharma, Dipasha; Behl, Abhishek; Kumar Tiwari, Aviral

Abstract

Purpose
The 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/approach
The 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.

Findings
Findings 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 implications
The 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/value
This 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.

Citation

Jain, R., Sharma, D., Behl, A., & Kumar Tiwari, A. (2023). Investor personality as a predictor of investment intention – mediating role of overconfidence bias and financial literacy. International Journal of Emerging Markets, 18(12), 5680-5706. https://doi.org/10.1108/IJOEM-12-2021-1885

• Journal Article Type: Article
• Acceptance Date: Mar 13, 2022
• Online Publication Date: Apr 4, 2022
• Publication Date: Dec 12, 2023
• Deposit Date: Jul 2, 2024
• Journal: International Journal of Emerging Markets
• Print ISSN: 1746-8809
• Publisher: Emerald
• Peer Reviewed: Peer Reviewed
• Volume: 18
• Issue: 12
• Pages: 5680-5706
• DOI: https://doi.org/10.1108/IJOEM-12-2021-1885
• Public URL: https://keele-repository.worktribe.com/output/855869
• Publisher URL: https://www.emerald.com/insight/content/doi/10.1108/IJOEM-12-2021-1885/full/html