Investor behaviour and investment decisions: Evidence from Pakistan Stock Exchange (early view)

Abstract

This research aims to understand the influence of behavioral factors on investment decisions in the Pakistan Stock Exchange (PSX). This study gathered primary data using a survey-based questionnaire from 318 individual investors. The sample data were analyzed using partial least square - structural equation modeling (PLS-SEM) based approach. Results indicate that financial knowledge, sentiment, overconfidence, over and under-reaction and perceived market efficiency significantly affect the investment decision. Interestingly, herd behavior does not play a significant role in predicting investment decisions. However, we are certain that this study will provide a better understanding of the relationship between behavioral factors and an investor's investment decision in Pakistan.