Investigating the Impact of Psychological and Financial Factors on Investor Decision-Making in Competitive Markets
Keywords:
return, Psychological factors, liquidity, risk taking, investment decisionsAbstract
This study aimed to examine the impact of psychological factors (risk-taking, personality traits, and cognitive biases) and financial factors (liquidity, return, inflation, and interest rate) on investor decision-making in competitive markets. The research employed a descriptive–analytical design. Standardized questionnaires were distributed among 395 active investors randomly selected from stock, gold, currency, and cryptocurrency markets. Data were analyzed using SPSS and structural equation modeling (SEM) through Smart PLS. Construct validity was confirmed via confirmatory factor analysis, and reliability was ensured using Cronbach’s alpha. The results indicated significant relationships between psychological and financial variables and investment decisions. Risk-taking moderated the effect of perceived liquidity on investment choices (β=0.182, t=2.212). Perceived asset return had a significant positive effect on investment in volatile markets (β=0.318, t=7.377). Among financial factors, liquidity (β=0.293, t=6.741) and inflation (β=0.243, t=22.094) showed substantial impacts on investment decision-making. The overall goodness-of-fit index (GOF=0.435) and SRMR=0.071 confirmed an acceptable model fit. Collectively, the model explained 49% of the variance in investment decisions across competitive markets. The findings highlight that investment decisions are not solely driven by economic conditions but are strongly influenced by investors’ psychological profiles. Understanding these interplays enables financial analysts and policymakers to design more effective strategies to reduce risk and enhance rational investment behaviors.
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Copyright (c) 2024 Mehrdad Bozorgzadeh (Author); Arezoo Aghaei Chadegani (Corresponding author); Khadijeh Ebrahimi Kahrizsangi, Ehsan Kamali (Author)
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