Determinants of Contrarian Investment Decision: Moderating Role of Superstitions

Abstract

Objective The study aims to investigate the effect of need for cognition, financial literacy and investment experience on contrarian investment decision of male and female individual investors with moderating role of superstitions.

Background: The achievement of desired goals through contrarian investment strategy is a complicated process affected by many psychological and demographic factors.

Methodology: The study adopted a cross-sectional design and data was gathered using structured questionnaire. Sample of 387 individual investors of Pakistan Stock Exchange (PSX) was taken into account for data analysis.

Results: The study found that need for cognition and investment experience positively influence contrarian investment decision of male and female investors with moderating role of superstitions. However, direct effect of financial literacy and its interaction effect with superstitions on contrarian decision was insignificant for female investors.

Recommendations: It is recommended that investors should avoid using mental shortcuts and apply their cognitive efforts, experience and financial literacy for improved investment decisions.

Keywords: Contrarian Investment Decision, Financial Literacy, Investment Experience, Need for Cognition, Superstitions