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A qualitative phenomenological exploration of social mood and investors’ risk tolerance in an emerging economy

Humaira Asad (Institute of Business Administration, University of the Punjab, Lahore, Pakistan)
Iqra Toqeer (Institute of Business Administration, University of the Punjab, Lahore, Pakistan)
Khalid Mahmood (Department of Information Management, University of the Punjab, Lahore, Pakistan)

Qualitative Research in Financial Markets

ISSN: 1755-4179

Article publication date: 3 August 2021

Issue publication date: 12 January 2022

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Abstract

Purpose

The authors design a theoretical perspective that explores how different phases of social mood influence financial risk tolerance (FRT) among investors. Risk is involved in almost all financial decision-making. For a better understanding of risk tolerance behavior, the role played by social mood cannot be ignored. This study aims to explore the linkage between social mood and FRT of investors in Pakistan.

Design/methodology/approach

Using qualitative phenomenology as the guiding framework, 22 interviews were conducted to have a deeper understanding of the lived experiences of investors with at least 10 years of investment experience. Thematic analysis was done to analyze data. Audio-recording, bracketing, triangulation and member checking were done to ensure validity and reliability.

Findings

A theoretical model is developed using the six themes identified through thematic analysis. This model presents an in-depth analysis of the determinants of social mood, its multiple phases and its impact on risk tolerance behavior. Findings reveal that the level of financial literacy, experience and purpose of investment moderate the effect of social mood on FRT.

Practical implications

Investors can manage risk and increase their profits by controlling the effects of social mood. They can benefit from the market situation by taking more risk when the market is extremely low. The advisors can frame their advice in the light of the model.

Originality/value

According to the authors’ knowledge, this is the first study that explores investors’ risk tolerance in response to variations in social mood in the context of an emerging economy. The paper has contributed conceptually and methodologically. It uses phenomenology as the method and develops a theoretical model that describes how different types of investors adjust their risk tolerance in response to changes in their social mood.

Keywords

Acknowledgements

The authors are deeply grateful to the Editor, and the anonymous reviewers for their valuable comments. These comments have helped us in improving the quality of the paper considerably. The authors take the responsibility for any other mistakes or errors within the manuscript.

The authors acknowledge that we have not received funding from any source for this project.

Citation

Asad, H., Toqeer, I. and Mahmood, K. (2022), "A qualitative phenomenological exploration of social mood and investors’ risk tolerance in an emerging economy", Qualitative Research in Financial Markets, Vol. 14 No. 1, pp. 189-211. https://doi.org/10.1108/QRFM-01-2021-0006

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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