Moderating Effects of Financial Cognitive Abilities and Considerations on the Attitude–Intentions Nexus of Stock Market Participation

Tahmina Akhter,Mohammad Enamul Hoque

doi:10.3390/ijfs10010005

Tahmina Akhter, Mohammad Enamul Hoque

Open Access

https://doi.org/10.3390/ijfs10010005

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Abstract

This study aims to examine the determinants of investors’ behavioral intentions to participate in the stock market. In this attempt, this research investigated the direct and moderating effects of the financial cognitive abilities and the financial considerations on the nexus of attitudes and behavioral intentions of investors. Data for this study were collected from active and potential investors in the Dhaka Stock Exchange of Bangladesh using a structured questionnaire. The partial least squares method was used to examine the nature and extent of the relationships of investors’ behavioral intentions with their attitude, financial cognitive abilities, and financial considerations in making stock market investment-related decisions. The findings of this study suggest that investors’ attitudes, financial planning ability, and perceptions of financial risks and benefits are important factors that influence their decisions in stock market participation. Moreover, financial planning, financial satisfaction, and perceived financial risk moderate the nexus of attitude and behavioral intentions to participate in the stock market. This study, therefore, has significant implications for policymakers, stock market regulators, and financial service providers.

Highlights

Capital market theory suggests that every household should invest a part of their wealth in risky assets, for example, in equities, to earn a return with the risk premium on their investments (Campbell et al 2003; Curcuru et al 2010; Markowitz 1952)
The control variable educational level used in this study was found to have a significantly positive influence on the investors’ behavioral intentions to participate in the stock market, according to the findings of this study, the financial literacy level neither had any direct influence on the behavioral intentions nor had any incremental impact on the nexus of investors’ attitudes and behavioral intentions towards stock market participation
The empirical findings of this study showed that investors’ attitude, financial planning, and perceptions related to risk and benefits were the significant determinants of their behavioral intentions to invest in the stock market

Summary

Introduction

Capital market theory suggests that every household should invest a part of their wealth in risky assets, for example, in equities, to earn a return with the risk premium on their investments (Campbell et al 2003; Curcuru et al 2010; Markowitz 1952). Behavioral finance supports that individuals’ thinking processes and cognitive errors (Mate and Dam 2018) affect their financial investment-related decision-making process. Stock market participants follow “bounded rationality”, which refers to decisions that are satisfactory to themselves rather than taking optimal decisions as suggested by the “rational expectations” theory (Simon 1955). This study aimed to examine the influence of investor attitudes on the behavioral. Estimation intentions in stock market participation and how the financial cognitive abilities and. This study aimed to examine the influence of investor attitudes on the behavioral financial considerations of the participants affected the abovementioned relationship intentions in stock market participation and how the financial cognitive abilities and nexus. The financial considerations of the participants affected the abovementioned relationship nexus.

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