Social Media Stimuli and Retail Investor Behaviour: An Integrated Stimulus–Organism–Response Framework of FOMO, Herding, Overconfidence, and Financial Literacy

The rapid proliferation of social media has fundamentally transformed the manner in which retail investors access, interpret, and act upon financial information. Digital platforms such as YouTube, X (formerly Twitter), Reddit, Telegram, Instagram, and other social networking sites have evolved beyond communication tools to become influential sources of investment-related information, where financial influencers ("finfluencers"), online communities, and algorithmically curated content increasingly shape investor perceptions and market participation. While existing studies have independently examined Behavioral biases, financial literacy, and social media usage, the theoretical mechanisms through which social media stimuli influence investor Behavior remain fragmented. In particular, limited attention has been devoted to understanding how digitally mediated information environments activate psychological biases and how financial literacy may mitigate these effects.
This paper develops a conceptual framework grounded in the Stimulus–Organism–Response (S–O–R) paradigm to explain the Behavioral processes linking social media exposure to retail investors' decision-making. The proposed model conceptualises social media stimuli—including finfluencer recommendations, algorithm-driven content, and online investor communities—as external stimuli that activate internal psychological states represented by fear of missing out (FOMO), herding bias, and overconfidence. These organismic states subsequently influence investment Behavior, resulting in increased speculative trading, impulsive investment decisions, and reduced reliance on fundamental analysis. The framework further proposes financial literacy as a moderating mechanism capable of attenuating the influence of Behavioral biases, although its effectiveness is expected to vary across different bias dimensions. By integrating insights from Behavioral finance, financial literacy research, and digital consumer Behavior within a unified theoretical perspective, the paper addresses an important gap in the existing literature. The proposed framework offers a foundation for future empirical research and provides practical implications for financial educators, market regulators, policymakers, and investor protection agencies seeking to promote informed investment decisions in increasingly digital financial markets.

Behavioral Finance, Retail Investor Behavior, Social Media, Financial Literacy, Stimulus–Organism–Response (S–O–R)

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