Impact of Social Influence and Emotional Bias on Investment Decision Making

This study examined the impact of social influence and emotional biases on investment decision-making among individual investors. The study employed a quantitative research approach with a sample size of 385 individual investors. However, the response rate was 79%, and the usable response rate was 68.31% of the sample.
Social influence and emotional biases were measured using loss aversion bias, overconfidence bias, social media influence, and peer pressure. The evidence indicates that loss aversion bias, overconfidence, and peer pressure had a significant positive influence on investment decision-making. However, social media influence had no significant contribution to investment decision-making among individual investors selected from six states in Nigeria, namely: Lagos, Ondo, Edo, Delta, Oyo, and Ogun States.
The findings suggest that investment decision-making among investors from these states is largely dependent on readily available information and strongly influenced by their own beliefs and emotions, without thorough research, investigation, and analysis of securities and the market. This leads to overtrading, overreaction to market trends, holding onto losing stocks, maintaining risky portfolios, selling gaining portfolios too early, and making investment decisions without proper analysis.
Based on the findings, the study recommends that investors, especially young adults, should be cautious of social media influence, as it can be misleading. Seeking advice from experts or professionals can be invaluable in avoiding this pitfall when making crucial investment decisions. Furthermore, emotional bias, possibly based on hearsay or misleading information about "window dressing" stocks, should be carefully evaluated and subjected to informed decision-making before taking any investment steps.

Social Media, Emotional Bias, Overconfidence, Peer Pressure

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