IDEAS home Printed from https://ideas.repec.org/a/gei/jnlfer/v5y2020i2p112-125.html
   My bibliography  Save this article

Factor Affecting Investment Behavior: Mediating Role of Self-Efficacy

Author

Listed:
  • Fouz Khalid

    (SG Allied Business Limited)

Abstract

Based on the theory of planned behavior, the study has examined the effects of risk tolerance, investment confidence, financial literacy, herding behavior on investment behavior with financial self-efficacy as an intervening variable among the investors of the stock market in Pakistan. The study has collected 350 sample responses from the investors of Pakistan Stock Exchange (PSX) using five-point Likert scale questionnaire. The study has employed PLS-SEM for data analysis using Smart PLS version 3.2.9. The results showed that investment confidence, and risk tolerance has positively significant relationship with financial self-efficacy while herding behavior has negatively significant relationship with financial self-efficacy. However, financial literacy has positive but statistically insignificant relationship with financial self-efficacy. Lastly, financial self-efficacy has positively significant relationship with investment behavior. Therefore, based on the research findings, it is recommended that financial investors should ensure that they design policies that enable them to learn from their own experience through reflection. Thus, they will be able to effectively learn from past trading experience, thereby reducing the risk of behavioral bias in trading stocks. Therefore, improving investor self-reflection capacity should be the focus of these educational programs.

Suggested Citation

  • Fouz Khalid, 2020. "Factor Affecting Investment Behavior: Mediating Role of Self-Efficacy," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 5(2), pages 112-125, October.
    • Handle: RePEc:gei:jnlfer:v:5:y:2020:i:2:p:112-125
    as

    Download full text from publisher

    File URL: http://geistscience.com/JFER/Issue2-20/Article5/JFER2005204.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chang, Eric C. & Cheng, Joseph W. & Khorana, Ajay, 2000. "An examination of herd behavior in equity markets: An international perspective," Journal of Banking & Finance, Elsevier, vol. 24(10), pages 1651-1679, October.
    2. Shneor, Rotem & Munim, Ziaul Haque, 2019. "Reward crowdfunding contribution as planned behaviour: An extended framework," Journal of Business Research, Elsevier, vol. 103(C), pages 56-70.
    3. Teng-Ching Huang & Kuei-Yuan Wang, 2017. "Investors’ Fear and Herding Behavior: Evidence from the Taiwan Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(10), pages 2259-2278, October.
    4. Farrell, Lisa & Fry, Tim R.L. & Risse, Leonora, 2016. "The significance of financial self-efficacy in explaining women’s personal finance behaviour," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 85-99.
    5. J. Magendans & J.M. Gutteling & S. Zebel, 2017. "Psychological determinants of financial buffer saving: the influence of financial risk tolerance and regulatory focus," Journal of Risk Research, Taylor & Francis Journals, vol. 20(8), pages 1076-1093, August.
    6. Warsame, Mohammed Hersi & Ireri, Edward Mugambi, 2016. "Does the theory of planned behaviour (TPB) matter in Sukuk investment decisions?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 12(C), pages 93-100.
    7. Stevenson, Regan M. & Ciuchta, Michael P. & Letwin, Chaim & Dinger, Jenni M. & Vancouver, Jeffrey B., 2019. "Out of control or right on the money? Funder self-efficacy and crowd bias in equity crowdfunding," Journal of Business Venturing, Elsevier, vol. 34(2), pages 348-367.
    8. S. Chatterjee & M. Finke & N. Harness, 2011. "The impact of self-efficacy on wealth accumulation and portfolio choice," Applied Economics Letters, Taylor & Francis Journals, vol. 18(7), pages 627-631.
    9. René Mauer & Helle Neergaard & Anne Kirketerp Linstad, 2017. "Self-Efficacy: Conditioning the Entrepreneurial Mindset," International Studies in Entrepreneurship, in: Malin Brännback & Alan L. Carsrud (ed.), Revisiting the Entrepreneurial Mind, chapter 0, pages 293-317, Springer.
    10. Hoffmann, Arvid O.I. & Post, Thomas, 2016. "How does investor confidence lead to trading? Linking investor return experiences, confidence, and investment beliefs," Journal of Behavioral and Experimental Finance, Elsevier, vol. 12(C), pages 65-78.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sarah D. Asebedo & Taufiq Hasan Quadria & Blake T. Gray & Yi Liu, 2022. "The Psychology of COVID-19 Economic Impact Payment Use," Journal of Family and Economic Issues, Springer, vol. 43(2), pages 239-260, June.
    2. Chen, Bin-xia & Sun, Yan-lin, 2022. "The impact of VIX on China’s financial market: A new perspective based on high-dimensional and time-varying methods," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    3. Nguyen, Huu Manh & Bakry, Walid & Vuong, Thi Huong Giang, 2023. "COVID-19 pandemic and herd behavior: Evidence from a frontier market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 38(C).
    4. Saffet Akdag & Ömer İskenderoglu & Andrew Adewale Alola, 2020. "The volatility spillover effects among risk appetite indexes: insight from the VIX and the rise," Letters in Spatial and Resource Sciences, Springer, vol. 13(1), pages 49-65, April.
    5. Julia Neuhaus & Andrew Isaak & Denefa Bostandzic, 2022. "Million dollar personality: a systematic literature review on personality in crowdfunding," Management Review Quarterly, Springer, vol. 72(2), pages 309-345, June.
    6. Zaremba, Adam & Szyszka, Adam & Karathanasopoulos, Andreas & Mikutowski, Mateusz, 2021. "Herding for profits: Market breadth and the cross-section of global equity returns," Economic Modelling, Elsevier, vol. 97(C), pages 348-364.
    7. Balushi, Yasmeen Al & Locke, Stuart & Boulanouar, Zakaria, 2018. "Islamic financial decision-making among SMEs in the Sultanate of Oman: An adaption of the theory of planned behaviour," Journal of Behavioral and Experimental Finance, Elsevier, vol. 20(C), pages 30-38.
    8. Hasnan Baber & Riri Kusumarani & Hongwei (Chris) Yang, 2022. "U.S. Election 2020: Intentions to Participate in Political Crowdfunding during COVID-19 Pandemic," Administrative Sciences, MDPI, vol. 12(3), pages 1-22, July.
    9. Sheza Riaz & Hadi Hassan Khan & Bilal Sarwar & Wahab Ahmed & Noor Muhammad & Sajjida Reza & Sheikh Muhammad Nabeel Ul Haq, 2022. "Influence of Financial Social Agents and Attitude Toward Money on Financial Literacy: The Mediating Role of Financial Self-Efficacy and Moderating Role of Mindfulness," SAGE Open, , vol. 12(3), pages 21582440221, August.
    10. Lu Fan, 2021. "A Conceptual Framework of Financial Advice-Seeking and Short- and Long-Term Financial Behaviors: An Age Comparison," Journal of Family and Economic Issues, Springer, vol. 42(1), pages 90-112, March.
    11. Batmunkh, Munkh-Ulzii & Choijil, Enkhbayar & Vieito, João Paulo & Espinosa-Méndez, Christian & Wong, Wing-Keung, 2020. "Does herding behavior exist in the Mongolian stock market?," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    12. Kumar, Satish & Rao, Sandeep & Goyal, Kirti & Goyal, Nisha, 2022. "Journal of Behavioral and Experimental Finance: A bibliometric overview," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    13. Yang, Jialiang & Li, Yaokuang & Calic, Goran & Shevchenko, Anton, 2020. "How multimedia shape crowdfunding outcomes: The overshadowing effect of images and videos on text in campaign information," Journal of Business Research, Elsevier, vol. 117(C), pages 6-18.
    14. Reveley Callum & Shanaev Savva & Bin Yu & Panta Humnath & Ghimire Binam, 2023. "Analyst herding—whether, why, and when? Two new tests for herding detection in target forecast prices," Economics and Business Review, Sciendo, vol. 9(4), pages 25-55, December.
    15. Bohl, Martin T. & Branger, Nicole & Trede, Mark, 2017. "The case for herding is stronger than you think," Journal of Banking & Finance, Elsevier, vol. 85(C), pages 30-40.
    16. Zhou, Xinxing & Gao, Yan & Wang, Ping & Zhu, Bangzhu & Wu, Zhanchi, 2022. "Does herding behavior exist in China's carbon markets?," Applied Energy, Elsevier, vol. 308(C).
    17. D'Arcangelis, Anna Maria & Rotundo, Giulia, 2021. "Herding in mutual funds: A complex network approach," Journal of Business Research, Elsevier, vol. 129(C), pages 679-686.
    18. Vassilios Babalos & Mehmet Balcilar & Rangan Gupta, 2014. "Revisiting Herding Behavior in REITs: A Regime-Switching Approach," Working Papers 201448, University of Pretoria, Department of Economics.
    19. Deborah A. Cobb-Clark & Sonja C. Kassenboehmer & Mathias G. Sinning, 2013. "Locus of Control and Savings," Ruhr Economic Papers 0455, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    20. Christian Espinosa-Méndez & José Arias, 2021. "Herding Behaviour in Asutralian stock market: Evidence on COVID-19 effect," Applied Economics Letters, Taylor & Francis Journals, vol. 28(21), pages 1898-1901, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gei:jnlfer:v:5:y:2020:i:2:p:112-125. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Imtiaz ARIF (email available below). General contact details of provider: https://geistscience.com/JFER/index.php .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.