The impact of social influence on the relationship between personality traits and perceived investment performance of individual investors

Abstract

Purpose The purpose of this paper is to clarify the relationship between an individual investor’s personality trait and his perceived investment performance. It proposes a novel conceptual framework that integrates social influence (as a moderating construct) and outlines the role of personality in determining the perceived investment performance during the investment decision-making process. Design/methodology/approach A questionnaire-based survey was conducted to collect responses from 396 individual investors through stratified and quota sampling approach. The collected data were then analysed using both hierarchical regression analysis and structural equation modelling to evaluate the strength of the relationship between the constructs, namely, personality trait, perceived investment performance and social influence. Findings This study suggests that social influence positively moderates the relationship between extraversion-perceived investment performance, whereas it negatively moderates the relationship between agreeability-perceived investment performance. Research limitations/implications This study has certain limitations. First, this work follows a modelling approach which is more centred towards the prediction of relationships. Second, because of choosing a research approach (since the study has been conducted in one country, i.e. India), the results of the study may lack generalisability. Therefore, further studies could be encouraged to test the proposed hypotheses. Practical implications Insights from this study suggest that investors should look in for their personality traits while making an investment decision. In fact, psychologically modified portfolios should be developed as per the personality traits of the investors. Originality/value The study, perhaps, is the only study to apply social influence in a framework using Big Five personality traits as a possible factor to understand the individual differences in terms of perceived investment performance.