Factors Affecting Share Traders' Investment Decisions: Investigating the Psychological, Social, and Economic Factors That Influence Share Traders' Investment Choices and Risk Tolerance
Authors: SP. Pragadeesh , A. Shivanaresh 
Published: June 2024

Deep Dive into Share Trader Decision-Making: A Psychological, Social, and Economic Exploration This research delves into the intricate world of share trader decision-making, specifically focusing on the interplay between psychology, social dynamics, and economic factors. It aims to shed light on how these multifaceted influences shape investment choices and risk tolerance, particularly among the burgeoning generation of young adult traders (Gen Z).  Beyond Rationality: the Behavioral Dimension Investment decisions are often depicted as exercises in cold, calculated logic. However, the field of behavioral finance challenges this notion, highlighting the significant role of psychological biases. This study builds upon this established knowledge by exploring how these psychological factors, along with social and economic considerations, converge to influence trading decisions and risk tolerance within the Gen Z demographic.  Methodology: Unveiling the Underlying Factors To gather valuable insights, the study will employ a survey methodology utilizing a five-point Likert scale questionnaire. Disseminated through social media platforms, the survey aims to capture data from a broad range of participants. The primary target audience will be Gen Z respondents (aged 18-21), with a subset of participants from older generations included for comparative analysis. The questionnaire will be meticulously crafted to assess psychological factors (e.g., overconfidence, fear of missing out), social influences (e.g., peer pressure, online communities), economic considerations (e.g., market trends, interest rates), and risk tolerance.  Hypotheses: A Framework for Understanding The study proposes a set of four core hypotheses to guide the investigation:  Psychological Influence: Psychological factors, such as overconfidence or anchoring bias, significantly impact share traders' investment decisions.  Social Dynamics in Play: Social factors, including group dynamics and the influence of online communities, exert a substantial influence on share traders' decisions.  Economic Considerations as a Guidepost: Economic factors, encompassing market trends, interest rates, and company performance, provide valuable guidance for share traders' decision-making processes.  The Moderating Effect of Initial Trades: Initial trade decisions act as a moderator, influencing the relationship between the aforementioned factors and an individual's risk tolerance.  Data Analysis: Unveiling the Relationships The collected data will be meticulously analyzed using structural equation modeling (SEM) software like SPSS AMOS. This powerful technique allows researchers to delve deeper by evaluating:  Confirmatory Factor Analysis: This analysis technique assesses the strength and validity of the relationships between the observed variables (survey questions) and the underlying latent variables (psychological factors, social factors, etc.). It essentially confirms that the survey questions are effectively capturing the intended constructs.  Path Coefficients: Path coefficients quantify the direct effects of each factor (psychological, social, economic) on risk tolerance. Additionally, the analysis will explore whether initial trade decisions moderate these effects, meaning they influence the strength of the relationship between the factors and risk tolerance.  Expected Outcomes: Illuminating the Path Forward This research aspires to achieve the following key outcomes:Demystifying Decision-Making: Identify the relative influence of psychological, social, and economic factors on Gen Z share traders' decisions.  Understanding Risk Tolerance: Elucidate how these factors interact and contribute to the development of risk tolerance among young adult investors.  Empowering Traders: Equip individual traders with valuable insights to bolster their decision-making processes and risk management strategies.  Informing Financial Literacy: Provide insights for policymakers and educators to design financial literacy programs and regulations that cater to the specific needs and preferences of young adult investors.  Acknowledging Limitations: A Call for Further Exploration The study acknowledges inherent limitations, such as the potential for self-reported bias in survey responses. Additionally, the initial focus on a specific age group (Gen Z) within a limited geographical area (India) necessitates further research to explore potential cultural and demographic variations in financial decision-making. This research serves as a springboard for future investigations, paving the way for a more comprehensive understanding of the nuanced interplay between psychological, social, and economic factors in shaping financial decision-making across diverse demographics and cultural contexts.