From rationality to bias: Factors influencing retail investment in newly launched investment products

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Abstract

Post sub-crime crisis, there has been a spike in innovations in new investment products introduced for retail investors. The investment decision of an Individual depends on many factors. However, there must be classified literature on factors affecting investment decisions in a newly launched investment product. The current research attempts to enlist the common factors affecting this decision based on the limited literature available for new products and then the literature for existing products, classifying them into economic factors, behavioral factors, and consumer behavior constructs applicable to financial services categories. The study tries to assess the presence of rationality in the investment decision based on the three categories of factors and the information available. The current study finds that behavioral and consumer behavior factors look more applicable to the newly launched product based on the available information at launch. The study finds a possible absence of rational decisions and concludes that the decision is more based on personality traits and psychological biases. A construct is created based on the commonalities of the three broad areas of study. This unique study can benefit the design-makers and marketers of the newly launched investment products.

Keywords: Economic Factors, Behavioral Factors, Consumer Behavior Constructs, Newly Launched Investment Products

Authors’ individual contribution: Conceptualization — H.G.; Methodology — H.G.; Validation — H.G.; Formal Analysis — H.G.; Investigation — H.G.; Resources — H.G. and S.P.; Writing — Original Draft — H.G. and L.S.; Writing — Review & Editing — L.S., N.S., and P.B.; Visualization — H.G.; Supervision — H.G. and L.S.; Project Administration — H.G.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G11, G41, G51, O16

Received: 14.06.2024
Revised: 03.10.2024; 04.11.2024; 10.02.2025
Accepted: 04.03.2025
Published online: 06.03.2025

How to cite this paper: Gwalani, H., Parkhi, S., Sreeram, L., Sreeram, N., & Barge, P. (2025). From rationality to bias: Factors influencing retail investment in newly launched investment products [Special issue]. Risk Governance & Control: Financial Markets & Institutions, 15(1), 197–203. https://doi.org/10.22495/rgcv15i1sip5