Impact of Financial Anxiety, Risk Tolerance, and Peer Influence on Investment Behavior among University Students

Abstract

The study addressed the correlation between the three research variables, financial anxiety, risk tolerance, and peer influence in determining the investment behavior of university students in Pakistan. The theory of planned behavior and the behavioral finance theory inform the research because it explores the influences of psychological and social antecedents on decision-making behavior of financial matters among young adults who are about to become economically independent. The study design was a quantitative one of 385 university students (in private and in general institutions of higher learners). The constructs in question were measured with the help of structured questionnaires and data obtained following the analysis were analyzed with the help of reliability analysis, correlation procedures and regression statistics.  The empirical evidence reveals that financial anxiety has a statistically significant negative impact on investment behavior with an implication that the higher the stress level, the less will encourage financial participation. Risk tolerance and peer influence, in contrast, showed strong positive correlations, indicating that an openness to uncertainty and the influence of social networks make them open to take risks in their financial activities. Together, the three predictors explained 41 % of the variance in investment behavior.   In theory, the research widens the behavioral finance lenses in a collectivist cultural context, whereas, in practice, it highlights the need to use specific financial education, student-led programs, and intervention strategies in order to reduce financial anxiety in students. Shortcoming of the current study and prospective lines of enquiry are also expressed.