Investor Risk Preference Differentiation Mechanism and Cross-Market Strategies under Cultural Dimension Differences
Main Article Content
Keywords
risk preference, Hofstede’s cultural dimensions theory, behavioral finance, cognitive biases, asset allocation
Abstract
Globalized financial markets demonstrate persistent heterogeneity in investor risk preferences, with individualist markets exhibiting significantly higher equity turnover than collectivist markets. However, the literature rarely integrates cultural psychology with behavioral finance in a unified empirical model. This study develops the Culture–Cognirtion–Decision framework, combining Hofstede’s six cultural dimensions with behavioral finance theory to examine how cognitive biases mediate the effect of cultural values on investment behavior. Using a multinational panel dataset covering sixty-one countries from 2014--2024 and applying a two-way fixed-effects regression with instrumental variables and the system generalized method of moments estimation, individualism positively correlates with equity allocation, collectivism amplifies herding behavior, high uncertainty avoidance suppresses speculative trading, long-term orientation distorts the disposition effect, and indulgence increases leverage tolerance. On the basis of these findings, a Culturally Adaptive Portfolio Strategy that adjusts asset weights following the cultural profiles of target markets is proposed. The results confirm that incorporating cultural psychology into financial decision-making produces measurable improvements in global asset allocation efficiency.
References
- Almansour, B. Y., Elkrghli, S. and Almansour, A. Y. (2023). Behavioral finance factors and investment decisions: A mediating role of risk perception. Cogent Economics & Finance, vol. 11, no.2, p. 2239032.
- Beugelsdijk, S., Brakman, S., Garretsen, H. and Van Marrewijk, C. (2013). International economics and business: Nations and firms in the global economy, Cambridge, UK: Cambridge University Press.
- Breitmayer, B., Hasso, T. and Pelster, M. (2019). Culture and the disposition effect. Economics Letters, vol. 184, p. 108653.
- China Household Finance Survey (Chfs) (2022). Southwestern University of Finance and Economics. Available: http://chfs.swufe.edu.cn/.
- Chui, A. C. W., Titman, S. and Wei, K. C. J. (2010). Individualism and Momentum around the World. The Journal of Finance, vol. 65, no.1, pp. 361-392.
- Goodell, J. W., Kumar, S., Lahmar, O. and Pandey, N. (2023). A bibliometric analysis of cultural finance. International Review of Financial Analysis, vol. 85, p. 102442.
- Griffin, P. (2013). Gendering Global Finance: Crisis, Masculinity, and Responsibility. Men and Masculinities, vol. 16, no.1, pp. 9-34.
- Hoftede, G., Hofstede, G. J. and Minkov, M. (2010). Cultures and organizations: software of the mind: intercultural cooperation and its importance for survival, New York, NY: McGraw-Hill.
- Muharam, H., Dharmawan, A., Najmudin, N. and Robiyanto, R. (2021). Herding Behavior: Evidence from Southeast Asian Stock Markets. In: BARNETT, W. A. & SERGI, B. S. (eds.) Recent Developments in Asian Economics International Symposia in Economic Theory and Econometrics. Leeds, UK: Emerald Publishing.
- Zheng, D., Li, H. and Chiang, T. C. (2017). Herding within industries: Evidence from Asian stock markets. International Review of Economics & Finance, vol. 51, pp. 487-509.
Article Sidebar
This work is licensed under a Creative Commons Attribution 4.0 International License.