An Investigation of Psychological Factors Inluencing Investment Decision Making

Abstract

This  study  applies  a  second-order  conirmatory  factor  analysis  (CFA)  approach  to investigate  psychological  factors  inluencing  individuals'  investment  decision-making.  A second-order  CFA  approach  consists  of  ive  irst-order  psychological  factors  in  terms  of mental  accounting,  regret  avoidance,  self-control,  heuristic  and  overconidence,  and  one second-order factor in terms of investment decision-making. Quantitative data was yielded by the questionnaire, and an effective sample of 752 responses was used to execute the estimation procedure.  The  results  reveal  that  there  exist  statistically  signiicant  relationships  between ive psychological factors and investment decision-making. Investors are likely to consider a product with different functions as one with different mental accounts (gains). Thus, inancial institutions  are  advised  to  provide  their  potential  customers  with  multi-function  products. Since self-control is  a  signiicant self-imposed mechanism  for  investment decision-making, inancial institutions can merchandise products that can help their customers to execute the self-imposed rules of thumb. ");} // --> activate javascript