Interconnectedness of Emotions with Investment Decision-Making: A Conceptual Framework

Shubhangi Verma; Purnima Rao; Bruce Burton; Satish Kumar

doi:10.1111/joes.12706

Interconnectedness of Emotions with Investment Decision-Making: A Conceptual Framework

Shubhangi Verma
, Purnima Rao
, Bruce Burton (Lead / Corresponding author)
, Satish Kumar

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

298 Downloads (Pure)

Abstract

This paper begins by investigating the influence of emotions on investment decision-making (IDM) via a systematic literature review. Contrary to the traditional view of investing, behavioral finance demonstrates that investors are frequently influenced by fallacies and irrationality. The study investigates the connection between emotions and IDM by analyzing research trends, methodologies and theories in the context of financial markets. The findings indicate that emotions influence risk appraisal in an identifiable manner, with investors' subconscious desires influencing both decision-making and market behavior. The study goes on to propose ‘The Rational-Emotional Investing Model’ which depicts the mechanisms by which emotions influence investment decisions. The model reflects the importance of emotional stability in decision-making and points to the need for regulators, investors and other financial professionals to comprehend the influence of emotions on market behavior.

Original language	English
Number of pages	17
Journal	Journal of Economic Surveys
Early online date	19 May 2025
DOIs	https://doi.org/10.1111/joes.12706
Publication status	E-pub ahead of print - 19 May 2025

Keywords

emotions
emotional finance
investment decision-making
investor sentiment
behavioral finance
stock market

Access to Document

10.1111/joes.12706Licence: CC BY

Final Published VersionFinal published version, 826 KBLicence: CC BY

Cite this

@article{09ff84a543614c5eaa64cbedff37481e,

title = "Interconnectedness of Emotions with Investment Decision-Making: A Conceptual Framework",

abstract = "This paper begins by investigating the influence of emotions on investment decision-making (IDM) via a systematic literature review. Contrary to the traditional view of investing, behavioral finance demonstrates that investors are frequently influenced by fallacies and irrationality. The study investigates the connection between emotions and IDM by analyzing research trends, methodologies and theories in the context of financial markets. The findings indicate that emotions influence risk appraisal in an identifiable manner, with investors' subconscious desires influencing both decision-making and market behavior. The study goes on to propose {\textquoteleft}The Rational-Emotional Investing Model{\textquoteright} which depicts the mechanisms by which emotions influence investment decisions. The model reflects the importance of emotional stability in decision-making and points to the need for regulators, investors and other financial professionals to comprehend the influence of emotions on market behavior.",

keywords = "emotions, emotional finance, investment decision-making, investor sentiment, behavioral finance, stock market",

author = "Shubhangi Verma and Purnima Rao and Bruce Burton and Satish Kumar",

note = "{\textcopyright} 2025 The Author(s).",

year = "2025",

month = may,

day = "19",

doi = "10.1111/joes.12706",

language = "English",

}

TY - JOUR

T1 - Interconnectedness of Emotions with Investment Decision-Making

T2 - A Conceptual Framework

AU - Verma, Shubhangi

AU - Rao, Purnima

AU - Burton, Bruce

AU - Kumar, Satish

PY - 2025/5/19

Y1 - 2025/5/19

N2 - This paper begins by investigating the influence of emotions on investment decision-making (IDM) via a systematic literature review. Contrary to the traditional view of investing, behavioral finance demonstrates that investors are frequently influenced by fallacies and irrationality. The study investigates the connection between emotions and IDM by analyzing research trends, methodologies and theories in the context of financial markets. The findings indicate that emotions influence risk appraisal in an identifiable manner, with investors' subconscious desires influencing both decision-making and market behavior. The study goes on to propose ‘The Rational-Emotional Investing Model’ which depicts the mechanisms by which emotions influence investment decisions. The model reflects the importance of emotional stability in decision-making and points to the need for regulators, investors and other financial professionals to comprehend the influence of emotions on market behavior.

AB - This paper begins by investigating the influence of emotions on investment decision-making (IDM) via a systematic literature review. Contrary to the traditional view of investing, behavioral finance demonstrates that investors are frequently influenced by fallacies and irrationality. The study investigates the connection between emotions and IDM by analyzing research trends, methodologies and theories in the context of financial markets. The findings indicate that emotions influence risk appraisal in an identifiable manner, with investors' subconscious desires influencing both decision-making and market behavior. The study goes on to propose ‘The Rational-Emotional Investing Model’ which depicts the mechanisms by which emotions influence investment decisions. The model reflects the importance of emotional stability in decision-making and points to the need for regulators, investors and other financial professionals to comprehend the influence of emotions on market behavior.

KW - emotions

KW - emotional finance

KW - investment decision-making

KW - investor sentiment

KW - behavioral finance

KW - stock market

U2 - 10.1111/joes.12706

DO - 10.1111/joes.12706

M3 - Article

SN - 0950-0804

JO - Journal of Economic Surveys

JF - Journal of Economic Surveys

ER -

Interconnectedness of Emotions with Investment Decision-Making: A Conceptual Framework

Abstract

Keywords

Access to Document

Fingerprint

Cite this