The Relationship between Psychological Factors, Risk Perception and Social Media on Investment Decision Making

  • Deepak B. Chaitanya
  • Norfarah Nordin


The purpose of this paper is to examine the determinants of investor’s investment decision-making in Indian stock markets. The hypothesized direct and indirect effect of psychological factors (anger, positive mood, fear and stress) and risk perception on investment decision making are based on the Behavioural Economic theory. However, the Cultivation theory is used as the basis to test the moderating effect of social media on investment decision-making. The data for the present quantitative study was collected using online survey questionnaire distributed to stock market investors in India. The samples were collected using convenient and snowballing sampling. The research hypotheses were tested and analysed using Partial Least Squares approach for direct and indirect effect test and Product Indicator approach for moderation analysis. Risk perception found to be significant in mediating the relationships between psychological factors such as anger, positive mood and stress towards stock market investment decisions. However, social media does not moderate the relationships between all the tested psychological factors and stock market investment decisions among Indian investors. The findings are beneficial for the stock market investors to be aware of the effect of positive and negative psychological factors on their judgment on risk perception and investment decision making. Despite the claim that social media might strengthen the effect of psychological factors on investment decision-making, this was found to be insignificant in this research.


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How to Cite
B. CHAITANYA, Deepak; NORDIN, Norfarah. The Relationship between Psychological Factors, Risk Perception and Social Media on Investment Decision Making. International Journal of Advanced Research in Economics and Finance, [S.l.], v. 3, n. 4, p. 55-72, dec. 2021. ISSN 2682-812X. Available at: <>. Date accessed: 27 jan. 2022.