Understanding Individual Investment Behaviour in China: The Role of Social Cognitions, Personality Traits, and Trust in Financial Advisers

Abstract

In a modern investment world with rapid change and increasing complexity, understanding individual investors’ behaviour has become so important for investors themselves as well as investment service providers to be adaptive to the dynamic and turbulent environments. It is necessary for individual investors to understand their rational actions with instincts and emotional biases that are affected by many complicated personal factors while making investment decisions. Investment service providers need to realize and intervene in the underlying influence mechanism of individual investment behaviour and know their clients more. This thesis represents the initial attempt to empirically provide an answer to the question, “what are the underlying influence mechanisms behind individual investment behaviour and how and when do they drive to invest money?” It draws on a comprehensive explanation of the key predictions of investment behaviour in the social cognition model (risk preference, social influence, and investment expertise) and the interactive roles of social cognitions and personality traits as well as of investment intention and trust in financial advisers, to develop an integrated theoretical model for articulating the underlying process of investment behaviour. To test the hypotheses, two studies were conducted using quantitative survey methods and different analytical techniques. The pilot study was conducted for scale validation. The main study examined the social cognition variables and the moderating effects of personality traits and trust in financial advisers. The additional robustness analyses followed on two specific investment behaviours with high risk: stock and private equity investment. Survey data were collected from 239 individual Chinese investors at two phases. As a result, the thesis found the importance of social cognition variables as the preconditions of investment behaviour. In addition, it also identified that the mediating effects of investment intention should not be absent when clarifying the underlying mechanisms of investment behaviour. This research is a strong signal indicating that individual investment behaviour research needs an integrated framework and that researchers should take the individual-centred factors in the future study and the investment contextual factors into consideration.

Date of Award	3 May 2019
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Charles Cui (Main Supervisor), RMS UnKnown (Co Supervisor) & RMS UnKnown (Co Supervisor)