Mediating Role of Risk Perception: Relationship of Overconfidence and Loss Aversion Biases with Investor’s Decision

Sidra Ajmal, Muhammad Irshad Burki and Wasif Anees

Abstract

Our research aims to analyze the moderating impact of risk perception on the relationship of biases (i.e., Overconfidence and Loss Aversion) and investor’s decision Questionnaire was developed to collect the data. The questionnaire was taken from the existing studies. Convenience sampling is used in our study from the financial analyst and finance scholars of Islamabad/ Rawalpindi and Lahore. The consequences of this study are significant that contributes to the acceptance of our all hypotheses. Firstly, the study focuses only on the decision-making behavior of individual equity investor by considering the risk perception as mediator. Secondly, the sample includes investors located in Islamabad/Rawalpindi and Lahore. In the future, researchers can focus on other segments of investors and can also enhance the geographical boundaries for more general conclusions. This study will help investors develop the policies which reduce the element of behavioral biases of an investor during the decision-making process.
Keywords: Overconfidence, Loss Aversion, Decision Making Behavior, Risk Perception