Examining the Impact of Emotional Intelligence on Investors’ Risk-Taking: The Mediating Role of Investors’ Mood

Document Type : Research Paper

Authors

1 MSc. Student, Department of Financial Management, Faculty of Economic and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran.

2 Associate Prof., Department of Financial Management, Faculty of Economic and Social Sciences, Chamran University of Ahvaz, Ahvaz, Iran.

3 Assistant Prof., Department of Management, Faculty of Economic and Social Sciences, Chamran University of Ahvaz, Ahvaz, Iran

10.22059/frj.2025.387197.1007679

Abstract

Objective
Investors in financial markets encounter a diverse and extensive range of financial instruments, each with its own characteristics and benefits. These instruments enable investors to select the most suitable options based on their financial goals, risk tolerance, and expected returns. Among these factors, the role of personality and psychological traits, particularly emotional intelligence, plays a significant role in financial decision-making and investment choices. The ability to manage emotions and emotional behaviors can substantially influence the level of risk-taking and the selection of appropriate financial instruments. Additionally, investors' moods when faced with financial opportunities and challenges are a critical determinant of their risk-taking behavior. This study aims to examine the effect of emotional intelligence on investors' risk-taking behavior, with the mediating role of their mood.
 
Methods
This study is applied in terms of its purpose and correlational in terms of its nature. Data collection was conducted using a questionnaire method. The statistical population of this study consists of investors in the Tehran Stock Exchange, from which 382 investors were voluntarily selected using a non-random sampling method and analyzed. In this study, the following questionnaires were used to measure the variables: the Emotional Intelligence Questionnaire by Salovey and Mayer (1990) with 33 items, the Panas (1988) Mood Questionnaire for investors with 20 items, and the Risk Tolerance Questionnaire for investors by Gerbel (2000) with 18 items. To confirm the validity of the questionnaires, in addition to face and content validity, construct validity was also evaluated. For assessing the reliability of the research variables, Cronbach's alpha, composite reliability, and average variance extracted (AVE) indices were used. The Cronbach's alpha and composite reliability values for all variables exceeded the 0.7 threshold, and the AVE values were above 0.5, indicating satisfactory reliability of the variables. The research hypotheses were tested using the structural equation modeling (SEM) method with Smart PLS software.
 
Results
The measurement model was first examined to ensure that the questionnaire items appropriately measured the latent variables. Factor analysis results indicated that the proposed model's factor structure had acceptable validity. All indicators had factor loadings above 0.5, showing a strong relationship between the indicators and their respective latent variables. Based on the findings, the impact of emotional intelligence on investors' risk-taking behavior was confirmed with a path coefficient of 0.443 and a t-statistic of 8.661. The effect of temperament on investors' risk-taking was also confirmed with a path coefficient of 0.217 and a t-statistic of 4.191. Additionally, the effect of emotional intelligence on temperament was confirmed with a path coefficient of 0.534 and a t-statistic of 13.606. To investigate the mediating role of temperament in the relationship between emotional intelligence and financial risk-taking, the Sobel test was used. The Sobel test result was 3.99. To examine the predictive power of financial risk-taking by the model, the adjusted R-squared coefficient, effect size, goodness-of-fit index, and redundancy index were used. The adjusted R-squared coefficient estimated the model’s predictive power at 0.342 (strong predictive quality). The effect size of financial risk-taking from emotional intelligence and temperament was assessed at 0.215 (moderate predictive quality) and 0.051 (moderate predictive quality), respectively. The overall goodness-of-fit index for the model was 0.436 (strong fit quality), and the redundancy index for the model was 0.86 (very good).
 
Conclusion
This study investigated the impact of emotional intelligence and mood on financial risk-taking. The results revealed that emotional intelligence has a positive and significant relationship with financial risk-taking. Individuals with higher emotional intelligence are better at identifying risks and are more inclined to take risks. Furthermore, mood has a substantial effect on financial risk-taking, particularly positive mood, which can enhance risk perception. Individuals with a positive mood perceive risks as growth opportunities and are more willing to accept them. Emotional intelligence also positively influences mood, as individuals with higher emotional intelligence exhibit a more positive mood. Finally, the findings indicate that mood acts as a mediating factor in the effect of emotional intelligence on financial risk-taking. These results can contribute to improving financial decision-making and reducing behavioral biases among investors.

Keywords

Main Subjects

References

 
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Financial Research Journal
Volume 27, Issue 4
2025
Pages 931-959

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