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The IUP Journal of Accounting Research and Audit Practices:

The Effect of Dispositional Innovativeness on Investment Behavior

Article Details

Pub. Date	: Oct, 2020
Product Name	: The IUP Journal of Accounting Research and Audit Practices
Product Type	: Article
Product Code	: IJARAP11020
Author Name	: Anu Antony
Availability	: YES
Subject/Domain	: Finance
Download Format	: PDF Format
No. of Pages	: 25

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Abstract

The paper integrates the findings of marketing and finance literature to increase the understanding of the investor's psychological tendency to invest in innovative financial products. Even though innovation was found to be an indispensable factor, the present study focused on investor behavior towards the new innovative financial instruments. The research further investigated the role of dispositional innovativeness in the investment preference of the investors. It was found that investor awareness towards the new financial instruments is high, but they always prefer to invest in the traditional avenues. Along with dispositional innovativeness, ambiguity intolerance was also tested. The sample was extracted from the investors of Kerala. Structural equational modeling was applied to test investor behavior. Parameters such as investment objectives, herd behavior, asset familiarization, ambiguity intolerance and risk tolerance were tested.

Description

Understanding and analyzing human behavior has become critical after the financial crisis of 2007-2008. This made the researchers highlight the irrational behavior of investors and their response to market sentiments. The investors' overreaction to the market sentiments is due to the psychological distortions in their judgment, also impacted by their anchoring bias. The ambiguity due to excessive optimism is found to be the driving force behind the crisis. The study on psychological distortion gives birth to behavioral finance.