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A qualitative phenomenological exploration of social mood and investors’ risk tolerance in an emerging economy

A qualitative phenomenological exploration of social mood and investors’ risk tolerance in an... The authors design a theoretical perspective that explores how different phases of social mood influence financial risk tolerance (FRT) among investors. Risk is involved in almost all financial decision-making. For a better understanding of risk tolerance behavior, the role played by social mood cannot be ignored. This study aims to explore the linkage between social mood and FRT of investors in Pakistan.Design/methodology/approachUsing qualitative phenomenology as the guiding framework, 22 interviews were conducted to have a deeper understanding of the lived experiences of investors with at least 10 years of investment experience. Thematic analysis was done to analyze data. Audio-recording, bracketing, triangulation and member checking were done to ensure validity and reliability.FindingsA theoretical model is developed using the six themes identified through thematic analysis. This model presents an in-depth analysis of the determinants of social mood, its multiple phases and its impact on risk tolerance behavior. Findings reveal that the level of financial literacy, experience and purpose of investment moderate the effect of social mood on FRT.Practical implicationsInvestors can manage risk and increase their profits by controlling the effects of social mood. They can benefit from the market situation by taking more risk when the market is extremely low. The advisors can frame their advice in the light of the model.Originality/valueAccording to the authors’ knowledge, this is the first study that explores investors’ risk tolerance in response to variations in social mood in the context of an emerging economy. The paper has contributed conceptually and methodologically. It uses phenomenology as the method and develops a theoretical model that describes how different types of investors adjust their risk tolerance in response to changes in their social mood. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Qualitative Research in Financial Markets Emerald Publishing

A qualitative phenomenological exploration of social mood and investors’ risk tolerance in an emerging economy

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References (110)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1755-4179
DOI
10.1108/qrfm-01-2021-0006
Publisher site
See Article on Publisher Site

Abstract

The authors design a theoretical perspective that explores how different phases of social mood influence financial risk tolerance (FRT) among investors. Risk is involved in almost all financial decision-making. For a better understanding of risk tolerance behavior, the role played by social mood cannot be ignored. This study aims to explore the linkage between social mood and FRT of investors in Pakistan.Design/methodology/approachUsing qualitative phenomenology as the guiding framework, 22 interviews were conducted to have a deeper understanding of the lived experiences of investors with at least 10 years of investment experience. Thematic analysis was done to analyze data. Audio-recording, bracketing, triangulation and member checking were done to ensure validity and reliability.FindingsA theoretical model is developed using the six themes identified through thematic analysis. This model presents an in-depth analysis of the determinants of social mood, its multiple phases and its impact on risk tolerance behavior. Findings reveal that the level of financial literacy, experience and purpose of investment moderate the effect of social mood on FRT.Practical implicationsInvestors can manage risk and increase their profits by controlling the effects of social mood. They can benefit from the market situation by taking more risk when the market is extremely low. The advisors can frame their advice in the light of the model.Originality/valueAccording to the authors’ knowledge, this is the first study that explores investors’ risk tolerance in response to variations in social mood in the context of an emerging economy. The paper has contributed conceptually and methodologically. It uses phenomenology as the method and develops a theoretical model that describes how different types of investors adjust their risk tolerance in response to changes in their social mood.

Journal

Qualitative Research in Financial Markets – Emerald Publishing

Published: Jan 12, 2022

Keywords: Pakistan; Emerging economy; Financial risk tolerance; Social mood; Socionomics

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