Determinant Factors of Overconfidence, Herding Behavior, and Investor Elements on Investment Decision Making in China

Abstract

Purpose–The purpose of this study is to research the influence of herd behavior, investor sentiment, overconfidence, and risk tolerance on the investment decision-making of Chinese individual investors. Design/Methodology/Approach–This study uses secondary data analysis, archival research, questionnaire survey, and other methods to explore the factors that affect investors' investment decision-making. This study uses three theoretical frameworks from previous studies to create a new conceptual framework. Findings–This study found that investor sentiment, overconfidence, and risk tolerance have different degrees of impact on investment decisions. Herding also has something to do with investor sentiment. Finally, overconfidence also affects the risk tolerance of investors. Research Limitations/Implications–There are some limitations in the research of investment decisions of individual investors in China. First of all, due to the epidemic, questionnaires can only be collected online. Secondly, the limited number of samples cannot represent the ideas of all investors. As a result, there may be more factors influencing investment decisions. Originality/value–this study is about the important influencing variables that affect investors’ investment decisions.