Negative Emotions and Decision-Making Paralysis Among Individual Investors: A Qualitative Approach

Alain Finet, Kevin Kristoforidis and Julie Laznicka ()
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Alain Finet: Health Institute, Financial Management Department, University of Mons, 7000 Mons, Belgium
Kevin Kristoforidis: Health Institute, Financial Management Department, University of Mons, 7000 Mons, Belgium
Julie Laznicka: Health Institute, Financial Management Department, University of Mons, 7000 Mons, Belgium

Risks, 2025, vol. 13, issue 11, 1-21

Abstract: The association between emotions and decision-making is evident. Our article aims to demonstrate, for individual investors, the development of negative emotional charges on stock markets in a perceived negative trend. The research question concerns how negative emotions may be associated with specific behavioral responses. Our results indicate a four-phase process involving, first, decisional “nonchalance”; second, decisional hesitation; third, partial disengagement; and, finally, decisional paralysis. The first phase appears related to the lack of experience of the individual investor, the second phase corresponds to the uncertainty related to stock market operations, while the last two phases seem to coincide with a deteriorating decision-making environment and the accumulation of negative experiences, resulting from financial expectations not being met. Emotional paralysis raises questions about the possibility of individual investors renewing their investment strategies. These results come from a qualitative approach based on experimental finance and supported by the analysis of data from semi-structured interviews. Our study proposes a new four-phase model (nonchalance, hesitation, partial disengagement, and paralysis) that delineates the emotional and behavioral trajectories of individual investors during a perceived bear market. Our qualitative perspective also contributes to existing literature by highlighting the underexplored phase of “nonchalance”.

Keywords: loss aversion; investors’ emotions; bear markets; qualitative finance (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:13:y:2025:i:11:p:209-:d:1783237

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