Abstract

Behavioral finance significance has been widely accepted. This subject investigates the investor’s irrationalattitude while investing in stock market. This study provides a more detailed psychological decision makingmodel for understanding the irrational behavior of investor while making investment in Tadawul. This studyused a self-administered questionnaire for collecting the responses from 119 investors of Tadawul. Correlationalstats are used to describe the association among the variables of the study.

Findings of this study confirms that investor behave irrationally. Positive association between risk perceptionand return expectations confirms the Value Function theory. Results of association between other studyvariables also confirm the hypotheses of the study. There is a negative relationship between informationasymmetry and risk perception. Positive association of risk perception is shown with risk propensity and returnexpectations. Negative association of risk perception is shown with reinvestment intentions, investmentperformance and risk satisfaction.

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