Do Emotions Influence the Investment Decisions of Generation Z Surabaya Investors in the Covid-19 Pandemic Era? Does Financial Risk Tolerance Play a Moderating Role?

Abstract

The purpose of this study was to investigate the influence of positive aand negative emotions on investment decisions during the Covid-19 pandemic, as well as to test risk tolerance as a intervening variable between basic emotions and investment decisions. This study uses endogenous variables, namely investment decisions and exogenous variables, namely positive and negative emotions including anger, sadness, hope, happiness, and fear. As well as the intervening variable, namely financial risk tolerance. Data collection was carried out by distributing questionnaires to 180 young investors in Surabaya, Indonesia. The questionnaire uses a 5-point Likert scale. Hypothesis testing uses a structural equation model. The results of the study indicate that there is a significant impact of positive emotions on investment decision-making. The association in question is mediated by financial risk tolerance. The regulation of the relationship between negative emotions and investment decisions by financial risk tolerance remains unclear. Furthermore, the impact of negative emotions on investment decisions appears to be insignificant. Practical implications of this research help young investors of generation z to manage their emotions, especially in the era of Covid-19. This is because emotions can affect their investment decision making. The originality of this research is a unique study of the positive and negative emotions associated with the investment decisions of young investors in the Covid-19 era. As well as risk tolerance which will strengthen the influence of emotions on investment decisions. The results of the research strengthen the theory of emotional intelligence and the dual process theory.