Factors Influencing Individual Investor Behavior: An Empirical Study of City Karachi

Abstract

This research study intends to examine the impact of financial literacy, accounting information, openness to experience and information asymmetry on individual investors’ decision making through the empirical research of the people living in Karachi city. Any investment is made with the primary objective of earning return on the invested sum. And depending on the degree of risk any individual can be classified as either RISK TAKER or RISK AVERTER. Duration of an investment is another aspect for any investment decision. Short term investments are rather riskier than long term investments in securities. Quantitative research was conducted to determine the relationship between desired explanatory and response variables. There were five independent variables including; financial literacy, high experience, use of accounting information, importance of analyzing financial statements and age that might affect the investment decision of any individual. Five different dependent variables were chosen from the questionnaire to reach to any conclusion they were; risk taking, preference investment in shares (risky investment), risk aversion, information asymmetry and shares investment. The obtained results show that financial literacy and accounting information helps investors in lowering information asymmetry and allows investors to invest in risky instruments. But as age and experience increase investors preference changes to less risky investments, it does not mean that investor does not prefer to invest in shares, he will but with the intension of getting dividend return rather than capital gain.