Impact of personality traits on stock investment decision making and the mediating effect of financial self efficacy

Abstract

This purpose of this research examines the influence of personality traits on individual stock investment decision-making and tests the mediating role of financial self-efficacy between the investors' traits and their stock investment decision-making in Sri Lanka. A questionnairebased survey was conducted to collect the data from 460 registered individual investors at Colombo Stock Exchange (CSE). The regression analysis was adopted to examine the impact of personality traits on stock investment decision-making. Moreover, mediating analysis was done using sobel test. The results revealed that extraverted individual investors prefer stock investment. In contrast, the individual who possesses sympathy toward others, helpfulness, and personal warmth tend to follow others' advice, and those agreeable investors negatively impact stock investment decisions at CSE. Further, the case of financial self-efficacy fully mediates the relationship of extra version, conscientiousness, neuroticism, and openness to experience with stock investment decision making and partially mediates the relationship of agreeableness and stock investment decision making. The study has insights to investors, stockbrokers, and regulators as the crucial factors to recognize individual investors' traits and financial self-efficacy differences in making a sound investment decision.