The Role of Personality Traits as Mediation: The Effect of Financial Literacy and Risk Perception on Investment Decision

Abstract

The complexity of making investment decisions can be shown through the emotions and patterns of behavior that vary when large investors make investment decisions. Emotions and behavior patterns can be formed from the personality, and knowledge possessed and understood by investors. This study has two main objectives: first, to find out the direct relationship between financial literacy, risk perception, the big five personality traits, and investment decisions; second, to find out the role of the big five personality traits as mediators in the relationship between financial literacy, risk perception, and investment decisions. This research was conducted on six University Investment Galleries members in Malang City. The sampling technique used in this study is proportional sampling. The sample size in this study was 130 respondents obtained by calculating the Slovin formula. Data collection was carried out by distributing questionnaires online to members of the investment gallery. The collected data was then analyzed using SEM-PLS. This study's results indicate a direct relationship between financial literacy, risk perception, the big five personality traits, and investment decisions. Not only that, but the results of this study also explain that the big five personality traits act as a partial mediation in the relationship between financial literacy, risk perception, and investment decisions. This study also found that investors with an open personality tend to be more receptive to information related to finance because investors are more aware of dynamic capital market movements. Hence, investors with an open personality tend to be more adaptable to new things.