Behavioral finance factors and investment decisions: A mediating role of risk perception

Figures & data

Table 1. Demographic and Experience Profile of Individuals Involved in the Saudi Equity Market

Criteria		n	%
Gender	Male	112	84%
	Female	22	16%
Total		134	100%
Age	less than 30 years	47	35%
	From 30–40	66	49%
	From 40–50	13	10%
	More than 50 years	8	6%
Total		134	100%
	Secondary School	16	12%
Education Level	Bachelor Degree	98	73%
	Master Degree	16	12%
	PhD Degree	4	3%
Total		134	100%
Experience	less than 5 years	117	87%
	From 5 - less than 15 years	14	10%
	From 15 - less than 25 years	3	2%
Total		134	100%

Table 2. Variables and Literature Sources Used for Measurement

Behavior/Decision	Items	Authors
Investment Decisions	7	Almansour and Arabyat (2017), Khawaja and Alharbi, (2021), Liang and Reiner, (2009)
Herding	10	Almansour and Arabyat, (2017), Balcilar et al., (2013), Kumari et al., (2022), Marjerison et al., (2023)
Disposition Effect	6	Adil et al., (2022), Ballis & Verousis, (2022) Paraboni & da Costa, 2021, Verma & Verma, (2018)
Blue Chip Stocks	5	S. U. Ahmed et al., (2022), Chua et al., 2023, Shiva and Singh, (2020)
Overconfidence	7	Adil et al., (2022), Liang and Reiner, (2009), Mushinada and Veluri, (2019), Renu Isidore and Christie, (2018)
Risk Perception	10	Gonzalez-Igual et al., (2021), Hossain & Siddiqua, (2022), Oyekale, (2022), Putri Pa et al., (2022)

Notes: The responses for each behavior/decision were measured on a 5-point Likert scale, with participants indicating their level of agreement on a scale from “strongly disagree” (1) to “strongly agree” (5).

Table 3. Results of Measurement Testing

Dimensions	Cronbach’s Alpha	N of Items
Investment Decision	.861	7
Herding Effect	.859	10
Disposition Effect	.891	6
Blue Chip Stocks	.874	5
Overconfidence	.850	7
Risk Perception	.915	10

Notes: All variables in the study had Cronbach’s alpha coefficients higher than 0.70. This indicates that the measured dimensions were reliable and consistent in measuring the intended constructs. The high values of Cronbach’s alpha coefficients in this study provide further support for the reliability of the measured variables.

Table 4. Descriptive statistics

	N	VIF	Mean	Std. Deviation	Skewness		Kurtosis
					Statistic	Std. Error	Statistic	Std. Error
Investment Decision	134	1.381	3.25	.924	−.335	.209	−.394	.416
Herding Effect	134	1.363	3.30	.836	−.498	.209	.109	.416
Disposition Effect	134	1.706	3.60	.915	−.506	.209	−.520	.416
Blue Chip Stocks	134	1.374	3.58	.986	−.648	.209	−.153	.416
Overconfidence	134	1.69	3.63	.847	−.506	.209	−.383	.416
Risk Perception	134	1.381	3.87	.729	−.923	.209	.879	.416

Notes: The collinearity statistics displays the variance inflation factor (VIF) values that test for multicollinearity among the variables which all values are less than 10 indicating that there is no multicollinearity issue.

Figure 1. Structural model.

Table 5. Testing model fit

	Model fit indices
Description of model	CFI	IFI	GFI	NFI	RMSEA
	1.000	1.000	1.000	1.000	0.409
Threshold	≥0.900	≥0.900	≥0.900	≥0.900	≤0.060

Notes: CFI: comparative fit index; IFI: incremental fit index; GFI: the goodness of fit index; NFI: normed fit index; RMSEA: root mean square error of approximation

Table 6. Hypotheses confirmation

Path	Regression coefficient	Critical value	Results
Panel 1: The effect of behavior finance factors on risk perception and investment decision
Herding → Risk Perception	.180**	3.094	Accepted
Disposition Effect → Risk Perception	.223***	4.234	Accepted
Blue Chip bias → Risk Perception	.274***	5.011	Accepted
Overconfidence → Risk Perception	.106	1.855	Rejected
Herding → Investment Decision	.288***	3.856	Accepted
Disposition Effect → Investment Decision	.134	1.920	Rejected
Blue Chip bias → Investment Decision	.092	1.246	Rejected
Overconfidence → Investment Decision	.148*	2.056	Accepted
Risk Perception → Investment Decision	.442***	4.104	Accepted
Panel 2: The effect of behavior finance factors on investment decision through risk perception
Herding → Risk Perception→ Investment Decision	.622**	1.960	Accepted
Disposition Effect→ Risk Perception→ Investment Decision	.665**	1.963	Accepted
Blue Chip bias → Risk Perception→ Investment Decision	.716***	2.581	Accepted
Overconfidence → Risk Perception→ Investment Decision	.548*	1.643	Accepted

Notes: The hypotheses are formulated to test the significance of the regression coefficients, and the critical values indicate the minimum level of significance required to accept the hypotheses. ***shows the 1% level of significance. **represent the 5% significance level. *shows the 10% significance level.

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