BEHAVIOURAL DETERMINANTS OF PERSONAL FINANCIAL INVESTMENT DECISION-MAKING: THE MEDIATING ROLE OF FINANCIAL AWARENESS IN AN EMERGING MARKET CONTEXT
DOI:
https://doi.org/10.69980/ne963c35Keywords:
Behavioral finance, PLS-SEM, Retail investors, Emerging markets, West BengalAbstract
Rapid expansion of financial markets, digital investment platforms, and diversified financial products has increased the need to understand how retail investors make investment decisions. In emerging economies such as India, investment behaviour is influenced not only by economic considerations but also by behavioural and cognitive factors. This study investigates the effects of Investor Attitude, Risk Perception, and Financial Awareness on personal financial Investment Decision-Making among retail investors in West Bengal and Eastern India. A quantitative cross-sectional survey design was adopted, and 550 questionnaires were distributed. After data screening, 408 valid responses were retained for analysis. SPSS was used for exploratory analysis, while SmartPLS and PLS-SEM were employed to assess the measurement model, test structural relationships, examine predictive relevance, and evaluate mediation effects. The results indicate that Financial Awareness is the most influential determinant of Investment Decision-Making, suggesting that investors with greater knowledge of financial products, market information, and risk-return trade-offs make more informed investment choices. Investor Attitude and Risk Perception also exert significant direct and indirect effects on Investment Decision-Making through Financial Awareness. The study extends behavioural finance and bounded rationality theory and provides practical implications for financial institutions, policymakers, advisors, and investor education initiatives aimed at improving investment decision quality.
References
1.Agarwal, A., Rao, N. M., & Nogueira, M. C. (2025). Financially savvy or swayed by biases? The impact of financial literacy on investment decisions: A study on Indian retail investors. Journal of Risk and Financial Management, 18(6), 322.
2.Agarwal, S., & Singh, S. (2024). Biases in capital market instrument investing decisions: A study from India. Australasian Accounting, Business and Finance Journal, 18(3).
3.Ahmad, M. (2021). Does underconfidence matter in short-term and long-term investment decisions? Evidence from an emerging market. Management Decision, 59(3), 692-709.
4.Ahmad, M., & Shah, S. Z. A. (2022). Overconfidence heuristic-driven bias in investment decision-making and performance: mediating effects of risk perception and moderating effects of financial literacy. Journal of Economic and Administrative Sciences, 38(1), 60-90.
5.Ahmed, Z., Noreen, U., Ramakrishnan, S. A., & Abdullah, D. F. B. (2021). What explains the investment decision-making behaviour? The role of financial literacy and financial risk tolerance. Afro-Asian Journal of Finance and Accounting, 11(1), 1-19.
6.Ahmed, Z., Rasool, S., Saleem, Q., Khan, M. A., & Kanwal, S. (2022). Mediating role of risk perception between behavioral biases and investor’s investment decisions. Sage Open, 12(2), 21582440221097394.
7.Ahuja, S., & Kumar, B. (2025). An elicitation study to understand the equity investment motivation and decisions among Indian millennials. Qualitative Research in Financial Markets, 17(1), 66-86.
8.Almansour, B. Y., Almansour, A. Y., Elkrghli, S., & Shojaei, S. A. (2025). The Investment Puzzle: Unveiling Behavioral Finance, Risk Perception, and Financial Literacy. Economics: Innovative & Economic Research Journal/Casopis za Ekonomsku Teoriju i Analizu, 13(1).
9.Al-Tamimi, H. A. H. (2009). Financial literacy and investment decisions of UAE investors. The Journal of Risk Finance, 10(5), 500–516.
10.Baker, H. K., & Ricciardi, V. (2014). Investor behavior: The psychology of financial planning and investing. Wiley.
11.Baker, H. K., & Ricciardi, V. (2015). Understanding behavioral aspects of financial planning and investing. Journal of Financial Planning, 28(3), 22–26.
12.Baker, M., & Wurgler, J. (2007). Investor sentiment in the stock market. Journal of Economic Perspectives, 21(2), 129–151.
13.Bandura, A. (1986). Social foundations of thought and action. Prentice Hall.
14.Barber, B. M., & Odean, T. (2001). Boys will be boys: Gender, overconfidence, and common stock investment. Quarterly Journal of Economics, 116(1), 261–292.
15.Barberis, N., Shleifer, A., & Vishny, R. (1998). A model of investor sentiment. Journal of Finance, 49(2): 307–343.
16.Bashir, T., Azam, N., Butt, A. A., Javed, A., & Tanvir, A. (2013). Are behavioral biases influenced by demographic characteristics? Evidence from Pakistan. European Scientific Journal, 9(29), 277–293.
17.Benartzi, S., & Thaler, R. H. (2007). Heuristics and biases in retirement savings behavior. Journal of Economic Perspectives, 21(3), 81–104.
18.Byrne, B. M. (2016). Structural equation modeling with AMOS (3rd ed.). Routledge.
19.Che Hassan, N., Abdul-Rahman, A., Mohd Amin, S. I., & Ab Hamid, S. N. (2023). Investment intention and decision making: A systematic literature review and future research agenda. Sustainability, 15(5), 3949.
20.Goyal, K., & Kumar, S. (2021). Financial literacy: A systematic review and bibliometric analysis. International Journal of Consumer Studies, 45(1), 80-105.
21.Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2019). Multivariate data analysis (8th ed.). Cengage.
22.Kahneman, D. (2011). Thinking, fast and slow. Farrar, Straus and Giroux.
23.Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291.
24.Kengatharan, L. (2014). The influence of behavioral factors in making investment decisions and performance: Study on investors of Colombo Stock Exchange, Sri Lanka. Asian Journal of Finance & Accounting, 6(1), 1–23.
25.Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy. Journal of Economic Literature, 52(1), 5–44.
26.Markowitz, H. (1952). Portfolio selection. Journal of Finance, 7(1), 77–91.
27.Mohta, A., & Shunmugasundaram, V. (2023). Millennials’ financial literacy and risk behavior: evidence from India. International Review of Economics, 70(4), 419-435.
28.Parveen, S., Satti, Z. W., Subhan, Q. A., Riaz, N., Baber, S. F., & Bashir, T. (2023). Examining investors' sentiments, behavioral biases and investment decisions during COVID-19 in the emerging stock market: a case of Pakistan stock market. Journal of Economic and Administrative Sciences, 39(3), 549-570.
29.Pompian, M. M. (2012). Behavioral finance and wealth management: How to build optimal portfolios that account for investor biases (2nd ed.). Wiley.
30.Ramakrishnan, S. (2017). An empirical analysis of investor behavior in the Indian stock market. International Journal of Management Studies, 4(3), 45–54.
31.Raut, R. K. (2020). Past behaviour, financial literacy and investment decision-making process of individual investors. International Journal of Emerging Markets, 15(6), 1243-1263.
32.Ricciardi, V. (2008). The psychology of risk: The behavioral finance perspective. Handbook of Finance.
33.Shefrin, H., & Statman, M. (2000). Behavioral portfolio theory. Journal of Financial and Quantitative Analysis, 35(2), 127–151.
34.Simon, H. A. (1955). A behavioral model of rational choice. Quarterly Journal of Economics, 69(1), 99–118.
35.Simonn, F. C. (2025). Past, present, and future research trajectories on retail investor behaviour: a composite bibliometric analysis and literature review. International Journal of Financial Studies, 13(2), 105.
36.Singh, S., Bharti, I., & Maurya, P. (2025). A Comprehensive Review of Prominent Biases and Other Factors Influencing Retail Investors’ Decision-Making. Indian Journal of Finance, 47-74.
37.Slovic, P. (1987). Perception of risk. Science, 236(4799), 280–285.
38.Srivastava, H., & Moid, S. (2026). Behavioral biases and individual investors investment decisions: Mediating role of financial risk tolerance. Quality & Quantity, 60(1), 2275-2295.
39.Statman, M. (2014). Behavioral finance: Finance with normal people. Borsa Istanbul Review, 14(2), 65–73.
40.Thaler, R. H. (2016). Behavioral economics: Past, present, and future. American Economic Review, 106(7), 1577–1600.
41.Weber, E. U., Blais, A. R., & Betz, N. E. (2002). A domain‐specific risk-attitude scale: Measuring risk perceptions and risk behaviors. Journal of Behavioral Decision Making, 15(4), 263–290.
