"Personality, Money, and Perception: Understanding the Psychological Forces behind Investment Choices"

Abstract

This study examines the impact of key personality traits such as neuroticism, extraversion, 
openness, agreeableness, conscientiousness, salience bias, and love of money on retail investors' 
decision-making at the Pakistan Stock Exchange (PSX). Grounded in the Five-Factor Model of 
Personality, the research aims to fill the knowledge gap on how these behavioral factors influence 
investment intentions. The study gathered data from 472 retail investors using a purposive 
sampling technique, and Smart PLS was employed for empirical analysis. The findings reveal that 
the identified behavioral factors significantly influence the decisions of retail investors by 
highlighting the psychological dimension of investment behavior. Moreover, perceived returns 
partially mediate the relationship between these factors and investment choices, suggesting that 
investor perceptions play an important role in the decision-making process. This underlines the 
complexity of investment psychology, where personality traits and biases shape financial 
outcomes. The practical implications of this research are relevant for brokerage firms, which can 
use these insights to conduct logit analyses of their retail clients' behavioral inclinations. This study 
offers valuable perspectives for both academics and practitioners by emphasizing the importance 
of behavioral finance in understanding and predicting the behavior of retail investors in emerging 
markets like Pakistan.