The Two-Factor Emotional Model of Investors in Pakistan: Validating a Gender-Specific Scale for Fear (Beta Portfolio) and Greed (Digital Disparity) in Stock vs. Crypto Markets

Abstract

This study develops and validates a gender-specific two-factor emotional model to measure fear and greed among 200 retail investors from the five major cities of Pakistan in Pakistan’s stock (PSX) and cryptocurrency markets. Fear is operationalized as beta portfolio (sensitivity to social approval risk) and greed as digital disparity (access-enabled overtrading). Using confirmatory factor analysis (CFA), reliability testing (Cronbach’s α ≥ 0.85), and structural equation modeling (SEM), the results confirm a robust two-factor structure. Men exhibit significantly higher greed scores (M = 3.89) than women (M = 2.91), while women demonstrate higher fear scores (M = 3.76) than men (M = 2.94). The model explains 68% of the variance in investment behavior. These findings extend behavioral finance to Pakistan’s unique digital gender context and offer practical tools for regulators and fintech platforms.