THE EFFECT OF RELIGION AND MORALS ON INVESTMENT DECISION-MAKING AND WANTS

Abstract

This thesis concentrates on investment decision-making and wants, by examining the impact of religion and morals. In addition, the study also considers the role of personality traits and education as secondary factors. Each of these characteristics will be studied separately and collectively to clearly understand the extent of significance each plays. Furthermore, the study will assess investor needs and the importance of expressive and emotional benefits. The role of these aspects falls under the scope of behavioural finance, a field that has traditionally been less appealing than conventional finance theory. However, more recently, behavioural finance has taken a more prominent role as empirical evidence has supported their claims. Moreover, the field has offered an alternative viewpoint that may explain certain issues that have failed the conventional finance perspective, such as the growth of socially responsible investments and the occurrences of financial crises, such as that of 2008/2009.

The study of the impact of the specified factors has been covered in the literature, however, this thesis utilizes a new and creative technique in which each factor is measured separately and then assessed in terms of investment decisions and needs. Such a technique is missing in the literature, as the existing approaches have linked non-financial issues to investment scenarios, rather than measure each factor separately, hence it is difficult to clearly understand the role of each aspect. Furthermore, this research considers the collective impact of all the factors, which is another contribution as to the best of the author’s knowledge, no study has done that. Lastly, the research also fills another existing gap as it addresses the theoretical framework developed by Prof. Statman (2017), that of the 2nd Generation of Behavioural Finance, which is a rather new theory that has not been thoroughly covered in the literature.

To fulfil the objectives of this study, the researcher employed two methods. The first was a questionnaire survey of university students from the University of Bahrain (Kingdom of Bahrain) and the University of Dundee (United Kingdom). The questionnaire aimed to identify the role of religion, morals, personality traits and education on investment decisions and needs. Each factor was measured separately and multiple techniques were used to measure investment decisions and needs. The inclusion of two locations would allow the research to understand whether the observed impacts were apparent in two very different environments. The second research method consisted of interviews conducted on different groups of people, to account for specific levels of experience and knowledge that are required to understand the role of each factor and provide context to the findings of the questionnaire.

The results of the study highlight that investment decisions and needs are highly impacted by an individual’s religion and morals. This finding was apparent throughout the questionnaire analysis, but, most interestingly was the inverse relationship between religion and morals, as those that were highly religious avoided moral investments and vice versa. This finding was discussed widely in the interviews, however, more research is required to understand this relationship. Furthermore, personality traits also displayed some significant impact, especially when measured alongside religion and morals, as the study showed that certain traits impacted the importance placed on non-financial needs. Moreover, the results in terms of personality traits differed in comparison to previous studies, however, this may be due to the nature of this study and how it differs in terms of the measurement of investment, as in this case the concentration is financial and non-financial needs. On the other hand, the findings questioned the role of education as a lack of significant results were found. Thus, overall, the findings may imply that in reality even financially knowledgeable individuals value non-financial aspects, and seek emotional and expressive needs. Hence, conflicting with the views of conventional finance in regards to investor rationality, and leaning towards the view of Statman (2017), as he defines investors as normal smart individuals that seek to fulfil many needs rather solely meeting utilitarian demands.

Date of Award	2022
Original language	English
Awarding Institution	University of Dundee
Supervisor	Suzanne Fifield (Supervisor) & Bruce Burton (Supervisor)