The influence of social media on investment decision-making: examining behavioral biases, risk perception, and mediation effects

N. Sathya () and C. Prabhavathi ()
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N. Sathya: Vellore Institute of Technology
C. Prabhavathi: Christ (Deemed to be University)

International Journal of System Assurance Engineering and Management, 2024, vol. 15, issue 3, No 11, 957-963

Abstract: Abstract The increasing use of social media platforms for investment-related information and advice has raised concerns about the impact of social media on investment choices. In this paper, we investigated the role of behavioral biases and risk perception in investment decisions. Specifically, this paper aims to explore the impact of social media on these factors and their influence on investment decisions. To achieve this aim, we investigated the existing works on the impact of social media on investment decisions, including its influence on behavioral biases and risk perception. We also collected data through an online survey from individual investors who use social media for investment-related information and advice. The survey measured their investment decisions, behavioral biases, risk perception, and the impact of social media on these factors. The valuable insights offered by this paper shed light on how social media affects the decisions made regarding investments and extend our understanding of the role of behavioral biases and risk perception in this context. Our results indicate that social media has a significant impact on the investment-related behaviors and perceptions of individual investors. Specifically, social media can exacerbate the effects of behavioral biases, such as herding and overconfidence bias, and influence risk perception. Moreover, the paper highlights the significance of managing social media use to make rational investment decisions. The paper's results can help individual investors make more informed investment decisions by understanding the impact of social media on their investment-related behaviors and perceptions. Moreover, the paper provides useful information to policymakers and financial regulators to develop guidelines for the responsible use of social media in the investment industry.

Keywords: Social media; Behavioral biases; Risk perception; Mediation analysis; Overconfidence bias; Herding behavior; Confidence; Investment behavior (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13198-023-02182-x

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