Investors’ financial aspirations excite investment decisions: current income, future inheritance expectations, and short-term and long-term decisions—The Matthew Effect in Pakistan’s emerging markets

Samra Chaudary, Sohail Zafar and Thomas Li-Ping Tang

International Journal of Emerging Markets, 2022, vol. 19, issue 5, 1306-1334

Abstract: Purpose - Following behavioral finance and monetary wisdom, the authors theorize: Decision-makers (investors) adopt deep-rooted personal values (the love-of-money attitudes/avaricious financial aspirations) as a lens to frame critical concerns (short-term and long-term investment decisions) in the immediate-proximal (current income) and distal-omnibus (future inheritance) contexts to maximize expected utility and ultimate serenity across context, people and time. Design/methodology/approach - The authors collected data from 277 active equity traders (professional money managers and individual investors) in Pakistan’s two most robust investment hubs—Karachi and Lahore. The authors measured their love-of-money attitude (avaricious monetary aspirations), short-term and long-term investment decisions and demographic variables and collected data during Pakistan's bear markets (Pakistan Stock Exchange, PSX-100). Findings - Investors’ love of money relates to short-term and long-term decisions. However, these relationships are significant for money managers but non-significant for individual investors. Further, investors’ current income moderates this relationship for short-term investment decisions but not long-term decisions. The intensity of the aspirations-to-short-term investment relationship is much higher for investors with low-income levels than those with average and high-income levels. Future inheritance moderates the relationships between aspirations and short-term and long-term decisions. Regardless of their love-of-money orientations, investors with future inheritance have higher magnitudes of short-term and long-term investments than those without future inheritance. The intensity of the aspirations-to-investments relationship is more potent for investors without future inheritance than those with inheritance. Investors with low avaricious monetary aspirations and without inheritance expectations show the lowest short-term and long-term investment decisions. Investors' current income and future inheritance moderate the relationships between their love of money attitude and short-term and long-term decisions differently in Pakistan's bear markets. Practical implications - The authors help investors make financial decisions and help financial institutions, asset management companies, brokerage houses and investment banks identify marketing strategies and investor segmentation and provide individualized services. Originality/value - Professional money managers have a stronger short-term orientation than individual investors. Lack of wealth (current income and future inheritance) motivates greedy investors to take more risks and become more vulnerable than non-greedy ones—investors’ financial resources and wealth matter. The Matthew Effect in investment decisions exists in Pakistan’s emerging economy.

Keywords: Behavioural finance/economics/prospect theory/risk-taking/aversion; Planned behaviour/TPB; Values; Love of money/money/greed/power/achievement/obsession/budget; Current/income/future/inheritance/time/gender; Short-term/Long-term/Decision-making; Conservation/resource/wealth/possession/stress; Bull/Bear/Market; Pakistan Stock Exchange (PSX-100) (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-07-2021-1098

DOI: 10.1108/IJOEM-07-2021-1098

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