Investor Psychology and Demographic Determinants of Investment Decisions in Pakistan

Abstract

This research examines the impact of investor demographics—specifically gender, age, education, and experience—on investment decisions in Pakistan, while considering behavioral factors such as sentiments, overconfidence, over/underreaction, and herding behavior as mediating variables. Data from 258 institutional and individual investors were subjected to analysis through partial multiple regression. Research indicates that sentiments and behavioral biases have a substantial impact on investment decisions. Age, gender, and education have a positive impact on investor behavior; however, experience by itself does not guarantee rational decision-making, frequently due to insufficient financial training. The study underscores the necessity for behavioral finance education, considering the emotional tendencies of retail investors in Pakistan. Regulatory bodies such as the SECP and financial institutions ought to incorporate behavioral insights into investor education and training initiatives to foster a more knowledgeable and resilient investor population.