PERSONALITY TRAITS AND INVESTMENT DECISION MAKING IN PAKISTAN: THE MEDIATING ROLE OF FINANCIAL SELF-EFFICACY AND EMOTIONAL BIASES

Abstract

This study investigates the influence of personality attributes on investment decision-making with the mediating role of financial self-efficacy and emotional biases in the Pakistani stock market. Using a sample of 500 individual investors in Pakistan Stock Exchange (PSX), data was acquired through a survey instrument. The overall sample data was examined using covariance-based structural equation modeling. The findings revealed that financial self-efficacy and three emotional biases, namely regret aversion bias, status quo bias and endowment bias, mediate between personality attributes and individual investment decision-making. The findings also revealed that extroversion and neuroticism significantly negatively impact investment decisions and financial self-efficacy, respectively. The findings suggest that investors with deliberative and optimistic thinking are possibly to make investment choices, have better financial efficacy and are likely to save their money.