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.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Abdullah, Naved Khan M (2021) Determining mobile payment adoption: a systematic literature search and bibliometric analysis. Cogent Bus Manag 8(1):1893245
Acemoglu D, Hassan TA, Tahoun A (2018) The power of the street: evidence from Egypt’s Arab spring. Rev Financ Stud 31(1):1–42
Ahmad M (2020) Does under confidence matter in short-term and long-term investment decisions? Evidence from an emerging market. Manag Decis 59(3):692–709
Amman M, Schaub N (2017) The impact of internet postings on individual investors. J Finance 64(5):1479–1512
Barber BM, Odean T (2014) The behavior of individual investors. In: Handbook of the economics of finance, vol 2. Elsevier, New York, pp 1533–1570
Barber BM, Odean T (2008) All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. Rev Financ Stud 21(2):785–818
Barron G, Erev I (2003) Small feedback based decisions and their limited correspondence to description-based decisions. J Behav Decis Mak 16:215–233
Bollen J, Mao H, Zeng X (2011) Twitter mood predicts the stock market. J Comput Sci 2(1):1–8
Bordino I, Battiston S, Caldarelli G, Cristelli M, Ukkonen A, Weber I (2012) Web search queries can predict stock market volumes. PLoS ONE 7(7):e40014
Compen B, Pitthan F, Schelfhout W, De Witte K (2022) How to elicit and cease herding behaviour? On the effectiveness of a warning message as a debiasing decision support system. Decis Supp Syst 152:113652
Faelens L, Hoorelbeke K, Soenens B, Van Gaeveren K, De Marez L, De Raedt R, Koster EHW (2021) Social media use and well-being: a prospective experience-sampling study. Comput Hum Behav 114:106510
Gruhl D, Liben-Nowell D, Guha R, Tomkins A (2004) Information diffusion through blogspace. ACM SIGKDD Explor Newsl 61(2):43–52
Hamad A, Sahib R, Ali AM (2015) The influence of the media oninvestor decisions: a field study of a sample of investors in Najaf Governorate. Kufa Univ J Econ Stud 4(3):57–89
Hong Z, Huang Y, Hu Y (2018) The impact of social media on investor behavior. J Bus Res 88:484–492
Hsieh PN, Lin YH, Shen CC (2018) Predicting stock returns with machine learning algorithms. J Empir Financ 49:111–129
Jibril AB, Kwarteng MA, Chovancova M, Pilik M, Wright LT (2019) The impact of social media on consumer-brand loyalty: a mediating role of online based-brand community. Cogent Bus Manag 6(1)
Kadous K, Mercer M, Zhou Y (2019) The effect of social media advice on investment decisions, workshop participants at DePaul University and the University of South Florida
Kim JY, Lee YJ (2016) Online social capital and offline social behavior: a survey study of social media users in Korea. J Comput-Mediat Commun 21(4):294–310
Lachance MJ, Gifford R (2016) Evaluating the effectiveness of environmental campaigns: a case study of an energy conservation and management program for commercial office buildings. J Environ Psychol 45:40–50
Lee H, Kim Y (2019) Social media use, financial literacy, and financial behavior: evidence from Korea. J Consum Aff 53(1):189–214
Luo X, Li L, Li S, Zhang J (2017) Predicting stock price movements with social media sentiment indices: a comparative study. J Electron Commer Res 18(3):198–212
McKnight PJ, Najand M (2019) Twitter sentiment, news articles, and stock prices: evidence from a Latin American market. Financ Res Lett 30:68–75
Xie W, Karan K (2019) Predicting Facebook addiction and state anxiety without Facebook by gender, trait anxiety, Facebook intensity, and different Facebook activities. J Behav Addic 8:79–87
Funding
No funding supports for the publication of this manuscript.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
Authors declare no conflict of interests.
Informed consent
Dr. Sathya N formulates the article, finding the relevant tools and designing. Dr.Prabhavathi has contributed significantly for drafting the revision of this research work. All the authors are agreed upon this manuscript for publication.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
About this article
Cite this article
Sathya, N., Prabhavathi, C. The influence of social media on investment decision-making: examining behavioral biases, risk perception, and mediation effects. Int J Syst Assur Eng Manag 15, 957–963 (2024). https://doi.org/10.1007/s13198-023-02182-x
Received:
Revised:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s13198-023-02182-x