Investigating the role of social influence and self-experience in the investment decision of a casual investor

Abstract

Investors make value judgements about their past choices and the consequences associated with them. Based on their reflection, they may be content and happy with the outcome, or after experiencing that outcome, may regret making the decision instead of an alternative choice. Apart from one’s own experience, an investor’s decision may also be influenced by the social environment (such as friends and relatives). This paper reports the result of an experimental study that specifically investigates the role of social influence in a casual investor’s investment decision making. The study shows that similar to one’s own experience, social influence plays a significant role in one’s investment decision.