Determinants of Investment Decision-Making Among Investors in Sabah

Retail investor participation in Sabah has grown across Baby Boomers, Generation X, and Millennials, yet capital market involvement remains relatively low compared with the state population. Investment decisions in this context are often made under uncertainty, where limited information, market volatility, emotions, and social influence may affect investor judgment. Existing behavioural finance studies have widely examined behavioural biases and investment decision-making, but many treat loss aversion, overconfidence, herding, and risk perception as separate factors. This limits understanding of how behavioural biases influence investment decisions through investors’ perception of risk. Therefore, this study examines the influence of loss aversion, overconfidence, and herding on investment decision-making among retail investors in Sabah. It further investigates risk perception as a mediating mechanism in the relationship between behavioural biases and investment decision-making. A quantitative cross-sectional design was used, and data were collected through an online questionnaire from 160 retail investors in Kota Kinabalu, Sandakan, and Tawau using purposive and snowball sampling. The data were analysed using Partial Least Squares Structural Equation Modeling through SmartPLS 4.1.1.7. The findings show that loss aversion and overconfidence do not significantly influence investment decision-making directly, while herding has a significant positive effect, although the direction differs from the hypothesised relationship. All three behavioural biases significantly influence risk perception, and risk perception significantly predicts investment decision-making. The mediation results confirm that risk perception mediates the relationships between loss aversion, overconfidence, herding, and investment decision-making. This study contributes to behavioural finance by showing that behavioural biases shape investment decisions primarily through risk perception. The findings also offer practical insight for investor education, financial institutions, and policy initiatives aimed at improving investment decision quality in Sabah.

Investment Decision-Making, Behavioural Biases, Prospect Theory, Social Learning Theory, Sabah

1. Adielyani, D., & Mawardi, W. (2020). The Influence of Overconfidence, Herding Behavior, and Risk Tolerance on Stock Investment Decisions: The Empirical Study of Millennial Investors in Semarang City. [Google Scholar] [Crossref]

2. Adil, M., Singh, Y., & Ansari, M. S. (2022). How financial literacy moderate the association between behaviour biases and investment decision? [Google Scholar] [Crossref]

3. Ahmed, Z., Shahid, R., Qasim, S., Khan, M. A., & Shamsa, K. (2022). Mediating role of risk perception between behavioral biases and Investor’s investment decisions. [Google Scholar] [Crossref]

4. Amgain, P. N. (2024). Behavioral Biases and Investment Decision: A Systematic Literature Review. [Google Scholar] [Crossref]

5. Anifa, A. S., & Soegiharto, S. (2023). Does the psychology of investment decisions depend on risk perception and financial literacy? [Google Scholar] [Crossref]

6. Annamalah, S., Raman, M., Marthandan, G., & Logeswaran, A. K. (2019). An empirical study on the determinants of an investor’s decision in unit trust investment. [Google Scholar] [Crossref]

7. Bakar, S., & Yi, A. N. C. (2016). The impact of psychological factors on investors’ decision making in Malaysian stock market: a case of Klang Valley and Pahang. [Google Scholar] [Crossref]

8. Baker, H. K., Kumar, S., & Goyal, N. (2021). Personality traits and investor sentiment. Review of Behavioral Finance, 13(4), 354-369. https://doi.org/10.1108/RBF-08-2017-0077 [Google Scholar] [Crossref]

9. Bashar Yaser Almansour, Sabri Elkrghli, Ammar Yaser Almansour. (2023). Behavioral finance factors and investment decisions: A mediating role of risk perception. [Google Scholar] [Crossref]

10. Bursa Malaysia. (2021). Retail investor participation report. Bursa Malaysia Berhad. [Google Scholar] [Crossref]

11. Bursa Malaysia. (2023). Annual retail trading report. Retrieved from Bursa Malaysia official website. [Google Scholar] [Crossref]

12. Bursa Malaysia. (2024). Malaysian retail investor insights. Bursa Malaysia. [Google Scholar] [Crossref]

13. Devadas, M., & Vijayakumar, T. (2019). Investment decisions, herd behaviour and retail investors. [Google Scholar] [Crossref]

14. Fatma Satyani. (2024). The influence of financial literacy, herding and overconfidence on investment decision making among indonesian gen z. [Google Scholar] [Crossref]

15. Haidari, M. N. (2023). Impact of decision-making on investment performance: A comprehensive analysis. Journal of Asian Development Studies, 12(4), 980–990. https://doi.org/10.62345/jads.2023.12.4.78 [Google Scholar] [Crossref]

16. Haritha, P., & Uchil, R. (2024). An empirical analysis of social and market dynamics influencing investment decision making of equity investors in India. [Google Scholar] [Crossref]

17. Hoffmann, A. O. I., Post, T., & Pennings, J. M. E. (2015). How investor perceptions drive actual trading and risk-taking behavior. [Google Scholar] [Crossref]

18. Joharudin, A. (2023). Understanding the nexus of financial literacy and behavioral biases in investment decisions. [Google Scholar] [Crossref]

19. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. https://doi.org/10.2307/1914185 [Google Scholar] [Crossref]

20. Kartini, K., & Nahda, K. (2021). Behavioral biases on investment decision: A case study in Indonesia. [Google Scholar] [Crossref]

21. Kumar, S., & Goyal, N. (2016). Evidence on rationality and behavioural biases in investment decision making. Qualitative Research in Financial Markets, 8(4), 270–287. https://doi.org/10.1108/QRFM-05-2016-0016 [Google Scholar] [Crossref]

22. Liang, P., & Guo, S. (2015). Social interaction, Internet access, and stock market participation: An empirical study in China. [Google Scholar] [Crossref]

23. Loh, T. C. (2016). The Influence of Behavioral Factors on Investment Decisions: Study of Millennial Investors in Kuala Lumpur. [Google Scholar] [Crossref]

24. Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. [Google Scholar] [Crossref]

25. Mahendra, R., Prayudi, N., & Purwanto, E. (2023). The Impact of Financial Literacy, Overconfidence Bias, Herding Bias and Loss Aversion Bias on Investment Decision. [Google Scholar] [Crossref]

26. Othman, F., Ismail, S., & Bakar, M. H. (2024). Unlocking the Psychology of Retail Investor Decision-Making: An Exploratory Factor Analysis in Malaysia. [Google Scholar] [Crossref]

27. Palash, B., & Anindita, C. (2021). Influence of risk perception on retail investors’ decision making. [Google Scholar] [Crossref]

28. Pandey, S., & Devi, K. N. (2024). Behavioral Biases and Decision-Making in Investment among working individuals in the education sector. [Google Scholar] [Crossref]

29. Paul, H. I. S., & Sundaram, N. (2023). Behavioral Biases and their Influence on Investment Decision-Making: A Systematic Literature Review and Future Research Agenda. [Google Scholar] [Crossref]

30. Puaschunder, J. M. (2018). Nudgitize Me! A Behavioral Finance Approach to Minimize Losses and Maximize Profits from Heuristics and Biases. International Journal of Management Excellence, 10(2), 1241-1256. https://doi.org/10.17722/ijme.v10i2.957 [Google Scholar] [Crossref]

31. Rahman, M., & Gan, S. S. (2020). Generation Y investment decision: An analysis using behavioural factors. Managerial Finance, 46(8), 1023-1041. https://doi.org/10.1108/MF-10-2018-0534 [Google Scholar] [Crossref]

32. Sabri, N. A. A. (2016). The Relationship between the Level of Financial Literacy and Investment Decision-Making Millennials in Malaysia. [Google Scholar] [Crossref]

33. Sarwar, A., & Afaf, G. (2016). A comparison between psychological and economic factors affecting individual investor’s decision-making behavior. Cogent Business & Management, 3(1), 1232907. https://doi.org/10.1080/23311975.2016.1232907 [Google Scholar] [Crossref]

34. Sathya, N., & Gayathiri, R. (2024). Behavioral Biases in Investment Decisions: An Extensive Literature Review and Pathways for Future Research. [Google Scholar] [Crossref]

35. Sharma, M., Damseth, A., & Shyam, I. (2024). Financial Literacy and Investment Decisions among Youth: An Analysis Using Prism of Age. [Google Scholar] [Crossref]

36. Tamara, D., Suhardiman, S., Rustam, S. S., & Kurniawan, B. (2022). Indonesian millennial generations’ financial literacy in relation to its behavior in investment decision. [Google Scholar] [Crossref]

37. Wei Liang, K., Kar Jun, D., & Kumar, R. (2023). Determinants of Stock Investment Decision Among Malaysian Youth. [Google Scholar] [Crossref]

38. Yanti, F., & Endri, E. (2024). Financial behavior, overconfidence, risk perception, and investment decisions: The mediating role of financial literacy. International Journal of Economics and Financial Issues, 14(5), 289–298. https://doi.org/10.32479/ijefi.16811 [Google Scholar] [Crossref]

39. Yuana, P., Kornitasari, Y., & Manzilati, A. (2024). The behavioral biases on investment decision behavior: Evidence from Indonesia. [Google Scholar] [Crossref]

40. Zahri, F. A., & Badaruddin, R. F. R. (2024). Demographic determinants of Amanah Saham Bumiputera (ASB) investment choices among Muslim investors in Kelantan, Malaysia. [Google Scholar] [Crossref]

41. Zakaria, Z., Maisarah, S., Nor, M., & Ismail, M. R. (2017). Financial Literacy and Risk Tolerance towards Saving and Investment: A Case Study in Malaysia. [Google Scholar] [Crossref]

• The Indirect Effect of Liquidity and Activity on Company Value with Profitability as an Intervening Variable
• Effect of Financial Skills, Knowledge, and Attitude on The Financial Behaviour of Clergy
• A Decade of Review: Trends in Budget Execution and Financial Performance of Development Projects in Tanzania (2014/15-2023/24)
• The Influence of Pre-Project Planning on the Budget Absorption Rate of Public Funded Infrastructure Projects in Kenya a Comparative Case Study of Narok, Migori, and Kisii County Government Projects
• Assessment of Factors Influencing Digital Transformation in Hotels’ Facility Management in Abuja Metropolis, Nigeria