Understanding the Decision-Making Dynamics of Retail Investors in The Fintech Era - A SEM Approach

Financial technology (Fintech) innovations have substantially transformed the landscape for retail investors by democratizing access to financial markets and providing sophisticated tools that were once exclusive to professional investors. The evolution of the financial technologies such as robo-advisory, algorithmic trading, and AI-driven market analysis has brought the activities of retail investors to the forefront, altering the dynamics traditionally dominated by institutional investors. The growing prominence of retail investors, a cohort marked by distinct investment patterns influenced by their financial goals, access to information, and cognitive biases has been underscored by recent market irregularities and an uptick in individual trading activities. This paper aims to investigate the intricacies of retail investor behaviors in Singapore, specifically examining the determinants that underpin their frequent investment activities in the stock market during the Fintech era. Through a comprehensive survey of 1,076 Singaporean retail investors, we evaluate the relative weight of decision-making factors for individual investors and the potential existence of variable groups that constitute identifiable constructs leveraged during the investment process. Our investigation is two-pronged: we first seek to quantify the significance of varying decisional factors in stock purchases among individual investors. Subsequently, we aim to identify clusters of these factors that consistently inform investment strategies. The goal is to delineate the characteristics of retail investors who engage more actively in the stock market, thus contributing to the academic dialogue on household finance and informing policy development.