Title: Does income moderate between risk aversion, information search behaviour and risky decision-making behaviour of investor? A case from Pakistan

Authors: Hifza Mahmood Rana; Saqib Murtaza; Fareeha Noor; Kashif ur Rehman

Addresses: Department of Management Sciences, Iqra University, Khayaban-e-Johar, H-9, Islamabad, Pakistan ' Department of Management Sciences, Iqra University, Khayaban-e-Johar, H-9, Islamabad, Pakistan ' Department of Management Sciences, Iqra University, Khayaban-e-Johar, H-9, Islamabad, Pakistan ' Department of Management Sciences, Iqra University, Khayaban-e-Johar, H-9, Islamabad, Pakistan

Abstract: The purpose of this study is to analyse whether income moderates between risk aversion and the investor's preferences for risky investments. A survey instrument (i.e., questionnaire) was distributed among the individual investors of three major cities of Pakistan (i.e., Karachi, Lahore and Islamabad). First, the moderating effect of income was examined through multi-group moderation analysis. Second, the direct effect of risk aversion on risky decision-making behaviour was examined through multiple regression analysis. Income was found to have a significant moderating effect on risky decision-making behaviour. Contrary to our assumption, income was positively correlated with risk aversion and risky decision-making behaviour. Risk aversion was found to have a significant but positive effect on the risky decision-making. Income did not have a significant moderating effect on digital information and risky decision-making behaviour. This research study helps in identifying the consequences of risk aversion on investor's risky decision-making behaviour in the presence of moderator, i.e., income level.

Keywords: risky decisions; decision making behaviour; risk aversion; income; advice-seeking information; digital information; heuristics; demographic characteristics; accounting information; Pakistan; information search; investor preferences; investment risks.

DOI: 10.1504/AAJFA.2014.064176

Afro-Asian Journal of Finance and Accounting, 2014 Vol.4 No.3, pp.349 - 366

Received: 28 Aug 2013
Accepted: 14 May 2014
Published online: 30 Aug 2014 *

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