Motivation and emotion/Book/2022/Financial investing, motivation, and emotion


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Overview

 * Overview of financial investing
 * Definition of motivation
 * Definition of emotion
 * Overview how motivation influences financial investing and relevant theories
 * Overview how emotions influences financial investing and relevant theories
 * Improving financial investing with consideration of motivation and emotion

Focus questions:
 * How does motivation impact financial investing?
 * How do emotions impact financial investing?
 * How can an individual improve their investing by considering theories of motivation and emotion?

What is financial investing?

 * Explanation of financial investing
 * Financial literacy including explanation of objective and subjective financial literacy (Aren & Hatice Nayman, 2020)

Motivations influencing financial investing

 * Money-2180330 1920.jpge motivation (Deci & Ryan, 2000)
 * Briefly summarise concept of Grand theories of motivation
 * Introduce concept of mini-theories of motivation
 * Introduce relevant theories of motivation as subheadings

Extrinsic motivation

 * What is extrinsic motivation? (Deci & Ryan, 2000)
 * Seeking financial gain as an extrinsic motivation for investing (Croce, 2020)
 * Capital gain is the primary motive for property investor, in addition to rental returns (Pawson & Martin, 2021)

Intrinsic motivation

 * What is intrinsic motivation? (Deci & Ryan, 2000)
 * Passion for investing as a motivating factor (Croce, 2020)

Emotions and financial investing

 * Define emotion and explain core emotions
 * Emotions may be the opposite of rational investing decision making (Aren & Hatice Nayman, 2020)
 * Introduce relevant theories of emotion, then expand as subheadings:

Regret theory

 * What is regret theory? (Loomes & Sugden, 1982)
 * How does regret impact investing behaviour? (Deuskar, Pan, D., Wu, F., & Zhou, H. (2021)

Risk taking

 * Negative emotions such as fear and sadness affect investing behaviour as they are predictors of risk aversion (Aren & Hatice Nayman, 2020)
 * Positive emotions such as hope and pursuit of happiness may make investors more inclined to take risks (Aren & Hatice Nayman, 2020)

Ending effect

 * The ending effect explains that individual preference shifts (and thus they are motivated to act accordingly) toward an emotional satisfaction when they near ‘the end’ (Xing et al., 2019)
 * Socioemotional selectivity theory posits that as an individual nears the end of their expected lifespan, their goals shift to emotion-related satisfaction  (Cartensen et al., 1999)
 * How does the ending effect and SST influence investing behaviour? (Xing et al., 2019)

Improving financial investing by considering motivation and emotion

 * Preventing emotion driven investments by engaging with an investment advisor (Maymin & Fisher, 2011)
 * Risk profiling (Van den Bergh-Lindeque et al., 2022)
 * Dollar cost averaging to manage investor’s emotions (Statman, 1995)

Quiz
{Extrinsic motivation is irrelevant to financial investing: - True + False
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{Dollar cost averaging may reduce emotional investing decisions: + True - False
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Conclusion

 * Summarise key points by summarising relevant theories and answering focus questions
 * Take-home message 1: Motivation and emotion impact financial investing
 * Take-home message 2: There are strategies that investors can use to reduce aforementioned impact