A profile of the Maltese investor : determining the factors contributing to the risk appetite and decision-making of the Maltese investor

Abstract

Through the testing of a number of propositions, the researcher analysed both the financial and behavioural aspects of the Maltese individual investor trading on the Malta Stock Exchange, shedding light onto the major characteristics of the local financial investor together with those variables that were found to affect the investor’s trading decisions. Key areas explored include investor’s expectations, returns from investment, risk and loss aversions, disposition effect, financial literacy, and overconfidence. The study also analyses the influence of financial advisors on the investor’s risk appetite.

The researcher used statistical data consisting of 370 valid responses obtained from a self-reporting questionnaire directed to active Maltese investors. Moreover, the researcher also adopted a thematic approach to analyse semi-structured interviews and commentaries from 29 financial advisors operating in different localities around Malta and Gozo.

Findings reveal that the Maltese investor is a confident investor who has high expectations but is flexible enough to adapt to the current market scenario and obtain satisfactory returns. Findings indicate that lower MGS rates have encouraged the local investor to seek alternative investments whilst positive past experiences together with insufficient information on issuing companies have led local investors to take risks beyond their risk appetite. Depending on the advisor’s own appetite, and on the strategies s/he adopts, financial advice promotes investors’ financial maturity and/or contributes to increase investors’ biases.