PREDICTING INDIVIDUAL INVESTOR’S INTENTION TO INVEST: A COMPARISON BETWEEN ACTUAL AND PERCEIVED FINANCIAL KNOWLEDGE

Abstract

This paper aimed to empirically check and evaluate statistically significant differences in structural relationships of actual and perceived financial knowledge, risk tolerance, and risky investment intention, via in total of 995 questionnaires sent to a sample group of the informal laborers in southern Thailand. Partial least squares structural equation modelling was used to analyze the results. It is worth noting that even though both actual and perceived financial knowledge affected each individual’s risk tolerance, still perceived knowledge affected more the individual’s risk tolerance. The actual and perceived financial knowledge that the individuals possess would enable them to make sound investments. Our study added the multi-group analyses in order to investigate if gender affected each individual’s decision-making on investment. The results revealed that in the case of men, both actual and perceived financial knowledge positively correlated with risky investment intention, whereas in the case of women only actual financial knowledge did. The key point from our study indicated that confidence or self-perceived knowledge was a significant factor affecting individual decision-making on investments. Hence, the educators and policymakers should provide effective lessons on financial knowledge by creating actual knowledge in order to help avoid overconfidence.