The Impact of Social Influence on the relationship between Behavioral Biases and Portfolio Diversification

Main Article Content

Ahmed Hassan Jamal
Muhammad Faisal Rizwan


The study examines the impact of behavioral biases on portfolio diversification of the investors trading at Pakistan Stock Exchange (PSX). The study also explores the moderating role of social influence in the association between behavioral biases and portfolio diversification. Biases studied in this research are overconfidence and hot hand fallacy. Primary data is collected from investors of Pakistan Stock Exchange using a structured questionnaire. A representative sample of 430 investors trading at Pakistan Stock Exchange is used in this study. The findings of this research have shown that behavioral biases impact negatively the portfolio diversification. The finding of this research also highlights that social influence moderates the association between hot hand fallacy and portfolio diversification. However, findings showed that social influence do not moderate the association between overconfidence and portfolio diversification. This research will be helpful for investors as well as for the regulators. This research will enable the investors to recognize the effect of biases in their ability to diversify the investment portfolio. They will also consider the role that social influence play in the impact of these biases on portfolio diversification. On the other hand, this research also highlighted areas where regulators can educate investors. The study finds a strong support from Theory of Planned Behavior. Previously researches have studied the effect of biases on investment horizon, investment decisions or investment risk. This research is unique in a way that it examines the effect of biases on portfolio diversification.

Article Details

How to Cite
Hassan Jamal, A. ., & Faisal Rizwan , M. (2022). The Impact of Social Influence on the relationship between Behavioral Biases and Portfolio Diversification. Journal of Workplace Behavior, 3(2), 84–99. Retrieved from
Author Biographies

Ahmed Hassan Jamal, International Islamic University, Islamabad

Ahmed Hassan Jamal is a PhD Scholar at International Islamic University, Islamabad. He is also an Associate Member of Association of Chartered Certified Accountants – UK. He has more than 7 years of teaching experience at Allama Iqbal Open University as a permanent faculty member. He has published articles in various reputed journals. His research interests are in behavioral finance, corporate governance, corporate finance and portfolio management. Ahmed Hassan Jamal is the corresponding author and can be contacted at:

Muhammad Faisal Rizwan , International Islamic University Islamabad Pakistan

Muhammad Faisal Rizwan, PhD, is an Associate Professor at International Islamic University, Islamabad. He has almost 20 years of teaching experience at university level. He has guided numerous Doctoral research scholars. He has published his articles in national and international journals. His areas of interest are financial management, financial Analysis, corporate finance, financial statements analysis and investment management.


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