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Insights from Neuroscience towards Investment Decision Making

Author

Listed:
  • Anum Khan

    (Mohammad Ali Jinnah University, Karachi, Pakistan)

  • Syed Muhammad Noaman Ahmed Shah

    (Villa College, Malé, Maldives)

  • Muhammad Shujaat Mubarik

    (Edinburgh Business School, Heriot-Watt University, Edinburgh, UK)

Abstract

As the advancement in the field of finance continues, the human brain plays a vital role in understanding the investment behavior. Over the passage of time, it emerges as a challenge for traditional views to make decisions by the investors. This research highlights the impact of neurotransmitters on investment options and their relationship with information sources. Moreover, this study focuses on the following aspects: (i) Role of Emotional Intelligence (EI), (ii) Revealing the cognitive biases which influences investment decisions. Data collection is done through a close-ended questionnaire from 719 retail and institutional investors in the financial and stock market of Pakistan (PSX). Data is then analyzed with the help of Partial Least Squares Structural Equation Modeling (PLSSEM). The study reveals a substantial relationship between neurotransmitters, information sources, and investment decisions. It is quite notable that EI was found to have no significant regulating effect on the relationshp between neurotransmitters and investment decisions. This research study corroborates the critical influence of neurotransmitters on investment decision making, highlighting the cognitive biases that direct the investment behaviors. The contribution of the research expands to a deeper comprehension of cognitive mechanisms in the age of neuroscientific financial exploration and giving the novel outlooks within the field.

Suggested Citation

  • Anum Khan & Syed Muhammad Noaman Ahmed Shah & Muhammad Shujaat Mubarik, 2024. "Insights from Neuroscience towards Investment Decision Making," Economic Research Guardian, Mutascu Publishing, vol. 14(2), pages 88-109, December.
    • Handle: RePEc:wei:journl:v:14:y:2024:i:2:p:88-109
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    References listed on IDEAS

    as
    1. Margarida Abreu & Victor Mendes, 2010. "Financial literacy and portfolio diversification," Quantitative Finance, Taylor & Francis Journals, vol. 10(5), pages 515-528.
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    More about this item

    Keywords

    Information Source; Neurofinance; Investment Decisions; Emotional Intelligence; Neurotransmitters;
    All these keywords.

    JEL classification:

    • G4 - Financial Economics - - Behavioral Finance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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