Endowment, Status Quo Bias & Investment Decisions: Mediating Role of Emotional Intelligence

Abstract

This research adds value in comprehension of behaviorally biased investors and the impact on their investment decisions with mediating role of emotional intelligence. It is important to investigate how psychological biases effect investor 's decision making. Previously different behavioral biases have been studied the most common of them are optimism bias, overconfidence bias, loss aversion bias and hindsight bias. The current study mainly focus on two emotional biases which are endowment and status quo bias to analyze the behavioral pattern of investors in Pakistan if they are the victims of emotional biases in their investment decisions. Survey based study was conducted using purposive sampling technique for precise measure and analysis. Data was collected from 300 investors in different areas of Rawalpindi and Islamabad. Mediation analysis was performed using Hayes Process (2013). The results of the study revealed an inverse relationship between both the emotional biases i-e endovvment and statusquo on the investment decisions both long term and short term. Moreover the findings of the study also revealed that emotional intelligence fully mediates the relationship between emotional biases and investment decisions by concluding that investors who are high in emotional intelligence quotient can make better investment decisions as compared to those who are overwhelmed by emotions in the decisions.