A Proposed Conceptual Framework on The Determinants of Psychological Biases towards Retail Investor’s Decision Making: Experience as Mediating Role

Abstract

Throughout this epidemic, retail investors play a crucial role in the Malaysian investment sector, as they must generate, expand, and sustain national investment growth. Therefore, it is essential to investigate the aspects of psychological biases towards retail investors’ decision-making. Hence, the study's aims to investigate the factors of psychological biases toward retail investors' decision making in Malaysia and to propose a conceptual framework that influences retail investors' decisions in Malaysia. The proposed conceptual framework for retail investors' decision-making in Malaysia is based on the Prospect and Heuristic theory and a study of previous literature. The previous literature was reviewed using systematic search methodologies. In summary, this study identifies anchoring, herding, risk perception, emotional, financial literacy, and investors' experience (mediator) as psychological biases influencing retail investors' decision-making in Malaysia. The study anticipates that the proposed framework will inspire researchers to continue researching this information by giving a clear image for future research. Furthermore, the significant impact of psychological biases on investor behaviour whereby cognitive limitations and emotional influence were associated in ensuring investors to react rationally.