Self-esteem as determinant of investors' stock market participation: Mediating role of risk preferences and behavioral biases

Abstract

The present study investigated how self-esteem affects stock market participation through risk preferences and behavioral biases such as loss aversion and regret. A total of 360 males (graduate and above) of the age group 25-40 years from northern part of India participated in the study. Conceptual framework was formulated and tested using AMOS 20.0. Loss aversion was measured by lottery choice task experiment and the level of regret was measured by a regret inducing situation followed by decision regret scale. The extent of stocks preference and risk preferences of the individuals was studied by eliciting information regarding their investments using a questionnaire. The results supported our proposed hypotheses. Mediation analysis proved that the impact of self-esteem on stock market participation not only operates through risk preferences of the investors but also through loss aversion and regret.