Investor Sentiment and Financial Decision-Making: A Novel Paradigm Incorporating Personality Characteristics into the Theory of Planned Behaviour

Abstract

This study aims to investigate investors’ investment intentions by integrating financial literacy and personality factors within the theoretical framework of the Theory of Planned Behaviour (TPB). Data for this study were collected through an expertly developed questionnaire distributed to a sample of 393 participants from the North Capital Region of India. Initially, a judgemental sampling strategy was employed, followed by the snowball sampling method to enhance participant recruitment. Hypotheses were evaluated using Structural Equation Modelling (SEM) and PROCESS macro v3.0. The results shed light on the components of the TPB, particularly attitude, subjective norms, financial self-efficacy, personality factors, and financial literacy, all of which significantly influence an individual’s intention to invest. Moreover, the research discusses the potential impact of improving financial literacy on encouraging greater involvement among investors in the stock market. Based on these findings, the study recommends regulatory organisations such as Securities and Exchange Board of India (SEBI) and Indian financial institutions to take proactive steps, such as organising seminars, courses, and programmes, to enhance financial literacy among individuals. This proactive approach is suggested to enhance investor comprehension and potentially stimulate increased participation in the stock market.

Keywords: Financial Literacy, Personality Traits, Theory of Planned Behaviour, PLS-SEM, SEM

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