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Exploring the relationship between investment choices, cognitive abilities risk attitudes and financial literacy

Abstract

Purpose The main purpose of this study is to investigate the investment choices' relationship with cognitive abilities, risk aversion, risky investment intentions, subjective financial literacy and objective financial literacy. Design/methodology/approach To examine the relationship, two investment choices were given to 256 subjects from Pakistan. Questionnaire had total 20 questions for measuring five variables. To review this nexus, discriminant analysis was used as to explore the depth of the nexus that is the ability of the variables to predict the investment choices. Findings This study establishes the findings that Investment choices are guided by risk aversion, risky investment intentions, financial literacy (subjective and objective) and cognitive abilities. The risk aversion has negative relation to investment choices and other variables depict positive relationship to with investment choices. Practical implications This study provides a new and useful understanding into the existing literature on investment choices. The results are significant as the cognitive abilities show a positive contribution to the investment choices. This is point of significance as the portfolio managers and advisors would get help in regards of advising investments as they are aware what factors impact the investment choices. Originality/value This study is novel in its nature to evaluate investment choices using the cognitive ability alongside risk attitudes and financial literacy.

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Category:
Articles
Type:
artykuły w czasopismach
Published in:
Journal of Economic and Administrative Sciences no. 39, pages 1122 - 1136,
ISSN: 1026-4116
Language:
English
Publication year:
2023
Bibliographic description:
Mushafiq M.: Exploring the relationship between investment choices, cognitive abilities risk attitudes and financial literacy// Journal of Economic and Administrative Sciences -Vol. 39,iss. 4 (2023), s.1122-1136
DOI:
Digital Object Identifier (open in new tab) 10.1108/jeas-07-2021-0130
Sources of funding:
  • COST_FREE
Verified by:
Gdańsk University of Technology

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