Between Fear and Greed: Behavioral Biases and In-vestment Decision-Making Among Millennial Retail In-vestors

Abstract

An increase is observed in the participation of millennial retail investors in the fi-nancial markets through digital platforms, where cognitive and social biases can systematically distort decision-making. This study addresses how behavioral bi-ases shape millennial investment decisions using Partial Least Squares Structural Equation Modelling (PLS-SEM). A model reflecting three latent constructs be-havioral bias (BB), trading and herding behaviour (TH), and risk perception and loss-aversion shifts (RP) of 80 millennial investors was estimated on survey data. The measurement model demonstrates strong reliability and validity (composite reliability 0.902–0.924; AVE 0.648–0.709). Structurally, behavioral biases exert-ed a strong, strategically well-powered effect on both trading and herding behav-iour (β = 0.761, f² = 1.38, R² = 0.579) and on risk perception and loss-aversion shifts (β = 0.739, f² = 1.20, R² = 0.545), with achieving power ≈ 1.000 at the 1% level. The results support all three hypotheses: overconfidence is associated with excessive trading and weaker risk assessment, social influence with herding, and loss aversion with risk-averse shifts under volatility. Findings underline the sali-ence of behavioral factors for investor education and platform design.