Examining the Relationship Between Financial Knowledge, Risk Tolerance, and Past Behavioural Bias on Investors Actual Investment Behavior

Abstract

Purpose:  The present study aims to determine the factors influencing investment intention and actual investment behaviour in mutual funds. The study uses financial knowledge and risk tolerance as moderators and past behavioral bias as a mediator.
  
 Theoretical framework:  The Theory of Planned Behaviour (TPB) appears to have become a very useful model for predicting various investing behaviours. Therefore, the present utilises the TPB model to analyse mutual fund investment behaviour.
  
 Design/methodology/approach:  The convenience sampling method was used to collect respondents from a population of 582 retail investors through questionnaire survey This research used partial least squares structural equation modelling (PLS-SEM) as the main method of data analysis using SmartPLS 4.
  
 Findings:  Attitude, financial knowledge, and risk tolerance emerged as the most important determinants of mutual fund investment intention. This highlights the significance of creating favorable conditions in terms of accessibility, which may encourage and ease the decision of investors to purchase mutual funds.
  
 Research, Practical & Social implications:  Marketers can explain how their mutual fund offerings would help both the market and investors. Marketers should prioritize proper communication about the benefits of mutual funds to investors, as communication is regarded as a critical tool for the success of mutual fund products.
  
 Originality/value:  To understand individual investors' intentions to engage in mutual funds, the impact of attitude, subjective norms, and perceived behavioural control on investor intentions and, actual investment behaviour were hypothesised and analysed, financial knowledge and risk tolerance functioning as moderators. Additionally, past behavioural bias is a mediator.