Generational theory of behavioral biases in investment behavior

Abstract

This paper proposes that millennials' investing behavior is driven by generational biases—investment-related biases that millennials share. The results of an online survey of 516 millennial investors revealed that generational biases—fear of missing out, socially responsible investing, overconfidence, and herding—positively influence their investing intention. This paper makes a novel contribution to the literature on financial psychology by proposing a generational theory of behavioral biases among a key investor segment. The generational theory of behavioral biases enables investment managers to understand financial anomalies at a collective level. This work suggests that managers must provide investing avenues that enable millennials to overcome the threat of missed opportunities. Moreover, managers must build a responsible corporate image to appeal to millennials’ socially responsible investing behavior. Investment managers must also launch intervention campaigns that seek to increase the financial competence of millennials.