Abstract:
Using theories from personality psychology and the theory of planned behavior,
this study investigated those personality variables and psychological mechanisms through
which individual investor intends to make investment decisions. The main purpose of this
study was to examine the relationship between big five personality traits (Extroversion,
Neuroticism, Conscientiousness, Openness to Experience and Agreeableness) and
Investment decisions (Short term and long term). This study also examined the moderating
effects of need for cognition, individual mood and mediating effects of financial self
efficacy between the study variables.
Data was collected from 506 individual investors by using a questionnaire.
Investors were selected from Pakistan Stock Exchange. Mediation analysis was performed
using Hayes (2013) PROCESS macro in SPSS. Results of the study supported a positive
relationship between openness to experience, extraversion and short term investment
decision. Similarly a positive relationship existed between neuroticism, conscientiousness
and long term investment decisions. The results from bootstrapping supported the
mediation hypothesis and financial self-efficacy mediated the relationship between
agreeableness, openness to experience and short term investment decision. Further the
results also supported the mediating effect of financial self-efficacy between neuroticism,
conscientiousness and long term investment decision.
To test the moderation hypotheses step-wise regression analysis techniques were
used. The results confirmed the moderating effect of need for cognition for extrovert &
neurotic investors on financial-self efficacy. The result of the study also supported the
modrating role of mood on short term investment decisions. In conclusion this study has
made an integrated attempt to examine the combined effect of personality, cognition and
mood on an individual’s short and long term investment decisions. Drawing on the findings
we discussed some implications for the policy makers including investment marketers,
investment advisors and offered an advice to investors in addition to discussing some
limitations and future directions
