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Title

Impact of Psychological Biases and Personality Traits on Investor Trading Behavior

Author

Zafar uz Zaman Anjum Nazar H.Phulpoto Sohail A. Memon Raza M. Pahore M. Imran Zuhaibuddin Bhutto

Citation

Vol. 19  No. 8  pp. 115-122

Abstract

Though, finance has been studied from several years, while behavioral finance is quite new field in financial studies which takes under consideration psychology of human being. Theories comes under behavior finance are based on the psychology, which tries to develop understanding how behavior of individual investors is being impacted by their emotions and cognitive errors. Present study is directed to examine how certain psychological biases and personality traits are influencing the investors’ trading behavior in Pakistan Commodity Market. Primary data was collected from investors of PMEX through survey questionnaires. The study has selected a sample size of 300 and after dispersion of survey questionnaires, 216 accurately filled questionnaires have been received back. Afterwards, collected data analyzed by utilizing SPSS and AMOS. The statistical tools utilized in present study included Confirmatory Factor Analysis (CFA) and Structural Equation Modeling (SEM). The outcomes of the study indicated that all exogenous latent variables which include psychological biases (overconfidence, loss-aversion, self-control) and personality traits (extraversion, openness to experience, agreeableness) have substantial impact on investors trading behavior. Therefore, the study concludes that investors at PMEX are alleged with psychological biases and personality traits during their trading activities. The outcomes of the study could be useful for individual investors, market regulators, commodity market advisors and financial educators in avoiding costly errors in trading. Present study also provided appropriate recommendations and directions for future studies.

Keywords

Pakistan Mercantile Exchange, Investor Trading Behavior, Overconfidence, Loss Aversion, Self-control, Extraversion, Openness, Agreeableness

URL

http://paper.ijcsns.org/07_book/201908/20190817.pdf