Investor Impulsivity and Mental Accounting: A Gender-Centric Investigation

Abstract

This study aims to examine how impulsivity is related to mental accounting in individual investors and to test whether gender moderates the relationship between the three types of impulsivities and mental accounting. Structural equation modelling was adopted to establish the impact of three types of impulsivities towards mental accounting. Construct reliability and validity were checked by Confirmatory Factor Analysis using Analysis of Moment Structures (AMOS) software. Multi-group analysis was also performed using AMOS 23. The level of mental accounting in participants was negatively correlated with non-planning impulsivity. However, gender differences were observed in the multi-group analysis. Gender significantly moderated the relationship between attentional impulsivity and mental accounting as well as between motor impulsivity and mental accounting. This study has practical implications on financial advisors and government, who can take individual differences in socio-demography and psychology into account while designing financial products and tools for money management. Since governments also have a major role in spreading financial literacy and awareness to improve the financial well-being of their citizens, individual differences in mental accounting are an important aspect that need to be studied and dealt with and this study will provide a preliminary foresight into these differences. This study may further help Asset Management Companies in customizing and engineering financial products according to the distinct needs of every individual. This study offers empirical insights into the mind of investors’ behaviour regarding mental accounting. There have been very few attempts to investigate individual variations in mental accounting and their causes. No previous study as per the knowledge of the authors has been conducted so far to empirically examine the impact of impulsivity on mental accounting in an emerging economy and the role of gender differences therein, and this study strives to fill this research gap.