Journal of Behavioral Finance

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Investor’s Intrinsic Motives and the Valence of

Word-of-Mouth in Sequential Decision-Making:
Modeling of Triple Serial Mediation

Fawad Ahmad

To cite this article: Fawad Ahmad (2023): Investor’s Intrinsic Motives and the Valence of
Word-of-Mouth in Sequential Decision-Making: Modeling of Triple Serial Mediation, Journal of
Behavioral Finance, DOI: 10.1080/15427560.2022.2138392

To link to this article: https://doi.org/10.1080/15427560.2022.2138392

Published online: 04 Jan 2023.

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JOURNAL OF BEHAVIORAL FINANCE
https://doi.org/10.1080/15427560.2022.2138392

Investor’s Intrinsic Motives and the Valence of Word-of-Mouth in Sequential

Decision-Making: Modeling of Triple Serial Mediation
Fawad Ahmad
Institute of Business Administration (IBA)

ABSTRACT KEYWORDS
Word-of-Mouth (WoM) is a socially embedded process, and investors engage in social con- Word-of-mouth; self-
siderations to achieve self-motives. Investors attempt to share negative WoM (NWoM) to motives; social-motives;
emotionally connect (self-affirm) to strengthen existing social ties following prior losses. In behavioral finance; social
finance; risk-attitude;
contrast, investors attempt to share positive WoM (PWoM) to self-enhance to attract others sequential risk-taking
into developing new social ties. Thereby, this study aims to predict the impact of prior
losses or gains on investors’ later decisions by engaging in the valence of WoM to achieve JEL CLASSIFICATION
different underlying self-motives and social-motives. This study used experimental data and G41; G11
employed PROCESS tool model 6 to check the validity of the proposed triple serial medi-
ation model. Findings support the viability of the triple mediation model that investors seek
to achieve different underlying self-motives and social-motives manifested in PWoM or
NWoM, following prior gains or losses. Investors seek to self-affirm by strengthening compo-
nents of social-motives through engaging in NWoM, following prior losses. While investors
seek to self-enhance to develop components of social-motives through sharing PWoM, fol-
lowing prior gains. Findings provide significant implications for researchers, managers, finan-
cial advisors, and analysts. Researchers, managers, and analysts can incorporate investors’
intrinsic factors in traditional economic models to better predict investors’ economic behav-
ior. Financial advisors need to understand self-motives and social-motives that change cli-
ents’ risk attitude and frame investment advice to achieve particular clients’ self-motives
and social-motives.

Introduction investment outcomes and to develop or strengthen

An escalation of commitment refers to an individual’s
tendency to engage in comparatively greater risk-tak-
ing following prior losses than gains (Staw 1976).
Prospect theory posits that prior gains and losses
influence differently investors’ risk attitude to engage
in later high or low risk-taking decisions, indicating
different underlying mechanisms guiding later deci-
sions. Investors engage in social interaction through
word-of-mouth (WoM)1 to share investment achieve-
ments, seek positive evaluation, achieve high perceived
status, and sustain self-integrity and self-image
(Sedikides and Gregg 2008; Sherman and Cohen
2006). Self-determination theory suggests that individ-
uals are motivated by self-desire to seek intrinsic
motives (i.e., self-motives and/or social-motives) to
achieve higher levels of self-motivation, self-determin-
ation, and self-confirmation (Deci and Ryan 2000).
Moreover, the underlying desire to recognize or deny
social activity motivates investors to engage in either
positive WoM (PWoM) or negative WoM (NWoM).2
Specifically, Ahmad, Oriani, and De Angelis (2021)
find that investors engage in NWoM (or PWoM) to
self-affirm (or self-enhance), following losses (or
gains) in prior decisions. Investors also seek to
strengthen (or develop) social-motives manifested in
NWoM (or PWoM). This suggests that investors seek
to achieve either self-motives or social-motives mani-
fested in PWoM or NWoM, following gains or losses
in the prior decisions.
However, WoM is communal activity (Kozinets
et al. 2010), and one of the important motivations for
WoM is social acceptance (Chen 2017). Individuals
engage in social interaction, which involves social con-
siderations to achieve self-motives (Alexandrov, Lilly,
and Babakus 2013; Chen 2017). According to social
exchange theory, individuals evaluate the self-benefits
of sharing opinions, and when benefits are higher

CONTACT Fawad Ahmad afawad2385@gmail.com Department of Finance, School of Business Studies (SBS), Institute of Business Administration
(IBA), Karachi, Pakistan.
ß 2023 The Institute of Behavioral Finance
2 F. AHMAD
than efforts, they engage in social interaction to
achieve them (Emerson 1976). We extend Ahmad,
Oriani, and De Angelis (2021) and consider WoM as
a socially embedded process to examine the underly-
ing mechanisms that explain differences in investors’
later risk-taking decisions following prior losses or
gains. Specifically, we predict that investors attempt to
share NWoM to emotionally connect (self-affirm) to
strengthen existing social ties following prior losses.
On the other hand, investors attempt to share PWoM
to self-enhance to attract others into developing new
social ties.
This study posits that following losses or gains,
investors strive to achieve a higher degree of self-satis-
faction (i.e., self-enhancement and self-affirmation).
To satisfy these needs through WoM, investors need
to engage in social considerations, which entails devel-
oping or strengthening social interaction ties, rela-
tional trust, and shared vision. Therefore, we propose
a triple serial mediation effect of self-motives, social-
motives, and valence of WoM on the relationship
between prior and later risk-taking decisions com-
pared to the double mediation effect of self-motive or
social-motives and value of WoM, provided by
Ahmad, Oriani, and De Angelis (2021).
This study employed experiment data from Ahmad,
Oriani, and De Angelis (2021) to validate the triple
serial mediation effect. Results suggested that investors
evaluate the benefits of self-affirmation to develop
social interaction ties, relational trust, and shared
vision and self-enhancement to strengthen relational
trust and shared vision (Hypotheses 1a (i, ii, iii) & 1b
(ii, iii)). Investors engage in NWoM to seek self-
affirmation via strengthening social interaction ties,
relational trust and shared vision following prior
losses (Hypothesis 2a (i, ii, iii). While investors engage
in PWoM to achieve self-enhancement through devel-
oping relational trust and shared vision, following
prior gains (Hypothesis 2b (ii, iii)). Finally, results
confirmed that WoM is a socially embedded process.
Investors’ decision to engage in later high (or low)
risk-taking is motivated by self-affirmation (or self-
enhancement) through strengthening (or developing)
social interaction ties, relational trust, and shared
vision manifested in NWoM (or PWoM), following
prior losses (or gains) (Hypotheses 3a (i, ii, iii) & 3b
(i, ii, iii)).
Findings contribute to the literature on the impact
of social interaction on investors’ desire to seek intrin-
sic motives. First, the WoM is a socially embedded
process, investors evaluate the self-motives (i.e., self-
affirmation and self-enhancement) before engaging in
social interaction to strengthen or develop social inter-
action ties, relational trust, and shared vision. This is
consistent with the concept of “social finance” coined
by Hirshleifer (2020) which highlights the role of
social processes as the main predictor of economic
and financial decisions of households and firms
(Kuchler and Stroebel 2021). Second, in the gain (or
loss) domain, investors desire to strengthen (or
develop) components of social-motives through self-
affirmation (or self-enhancement) manifested in
NWoM (or PWoM) to engage in low (or high) risk-
taking. Finally, the findings explain investors’ time
and efforts on social networking sites to post invest-
ment-related opinions or experiences. Investors desire
to achieve underlying social motives to strengthen or
expand components of social capital through self-
affirmation and self-enhancement manifested in
NWoM or PWoM. In doing so, investors seek to gain
emotional support, opinion confirmation, and social
desirability.
This study provides useful implications for
researchers, managers, financial advisors, and analysts.
First, the rational economic behavior model considers
economic benefits the main driver of economic behav-
ior. However, investors’ intrinsic motives impact
economic behavior in the context of sequential deci-
sion-making. Therefore, researchers, advisors, and
analysts should integrate intrinsic factors in economic
models to accurately predict investor behavior.
Second, financial advisors may better understand the
underlying self-motives and social-motives behind cli-
ent (re)investment decisions. It may help financial
advisors to offer clients investment choices according
to their risk-attitude and desire to achieve particular
intrinsic motives. Similarly, financial advisors can also
prevent client losses by modifying their risk-attitude
by framing investment advice to strengthen or develop
self-motives and social-motives.
The remainder of the paper is divided into four
sections. Section “Theory and hypothesis devel-
opment” deals with the underlying theory and related
literature to develop hypotheses. Section “Data and
method” elaborates on the paper’s methodology, fol-
lowed by the presentation of the results. The final sec-
tion discusses the main findings, implications, and
limitations.
Theory and hypothesis development
Three hypotheses were developed to establish the tri-
ple mediation effect of self-motives, social-motives,
and valence of WoM on the relationship between

Figure 1. Theoretical process model.
prior low (or high) risk-taking and later high (or low)
risk-taking.3 The first set of hypotheses drew on the
direct effect of self-motives on social-motives. The
second set of hypotheses proposed an indirect effect
of self-motives on the valence of WoM via social-
motives. The third set of hypotheses established the
indirect effect of self-motives, social-motives, and
valence of WoM on the association between prior
risk-taking and later risk-taking. The proposed model
is presented in Figure 1.
Theoretical reasoning is adopted from intentional
and behavioral models to develop the triple serial
mediation effect of self-motives, social-motives, and
valence of WoM on the association between prior and
later decisions (Alexandrov, Lilly, and Babakus 2013).
Theories of planned behavior and reasoned action are
the most widely used intentional models in literature
and are regarded as a good predictor of an individu-
al’s intention to engage in a behavior (Azjen 1991).
These theories provide theoretical constructs concern-
ing the underlying motivational factors as determi-
nants of an individual’s intention to engage in a
specific behavior. Intentional models assume that indi-
viduals are rational and analyze information to predict
the implications of their actions before engaging in a
specific behavior (Ajzen and Fishbein 1975; 1980).
Whereas consumer behavior models analyze the pro-
cess of individual actions and the satisfaction of
underlying motives as a consequence of those actions.
These theories provide logical reasoning for the rela-
tionship between self-motives and social-motives and
the subsequent triple mediation effect. This illustrates
that self-motives (motivational factors) and social-
motives (implications of actions) are intertwined, and
individuals engage in social interaction through WoM
that involves the realization of social-motives to
achieve self-motives, following prior losses or gains.
JOURNAL OF BEHAVIORAL FINANCE 3
Individuals (investors) seek to satisfy two main
self-motives, i.e., self-enhancement and self-affirm-
ation by engaging in social interaction. Self-enhance-
ment refers to individual efforts to seek constant
positive evaluation to feel good and desirable. To do
so, self-enhancers share positive (vs. negative) experi-
ences (De Angelis et al. 2012) to signal competence
(Wojnicki and Godes 2017) and impress others. They
seek high perceived status by taking credit for gains
and refrain from responsibility for losses. However,
individuals use self-affirmation as a self-defense mech-
anism to sustain self-imagine and self-integrity
(Campbell and Sedikides 1999). Self-affirmers usually
share negative experiences and present them as a con-
sequence of bad luck to counter the negative
reinforcement. In doing so, they justify their compe-
tence, knowledge, and experience to sustain their self-
image and present negative opinions as an intention
to help others (Alexandrov, Lilly, and Babakus 2013).
Individuals (investors) seek to form or strengthen
three main social-motives through engaging in social
exchange: social interaction ties, relational trust, and
shared vision. Social interaction ties represent the
extent and frequency of knowledge shared, emotional
connectedness, reciprocity, time spent, and strength of
the relationship between members in a social network
(Chiu, Hsu, and Wang 2006). Strong social interaction
ties facilitate the rapid and cost-efficient transfer of a
wide range of knowledge and help expand the social
network. Relational trust is defined as the convenience
of accessing others’ opinions and the availability of
emotional support in social interaction ties. The opin-
ion from social networks is considered more trust-
worthy than that from other unknown sources. A
shared vision refers to forming shared values, a sense
of affiliation, and a collective identity among social
interaction ties. Individuals with high levels of sense
of affiliation with social networks establish high self-
4 F. AHMAD
goals, whereas individuals with low levels of shared
vision try to establish self-identity by setting goals like
social networks (Choi, Seo, and Yoon 2017).
Direct effect of self-motives on social-motives
Individuals (investors) evaluate the self-benefits of
engaging in social interaction, which entails social
consideration to form or strengthen components of
social-motives (i.e., social interaction ties, relational
trust, and shared vision). For example, if an investor
gains in prior investment and intends to share positive
experience to seek high self-enhancement, which is
self-motive, he needs to evaluate expected improve-
ment in the self-status and engage in social interaction
with others (intention). This also implies that self-
motives and social-motives are interrelated because
investors need to engage in social interaction to
achieve high self-enhancement. Hence, the causal
sequence for an intentional model will be from high
self-enhancement (i.e., self-motives) to social inter-
action (i.e., consideration of social-motives).
Individuals achieve self-motives through WoM, but
before that, they evaluate the consequences of their
actions and develop the intention to engage in the behav-
ior. Without intentions, there is no behavior.
Accordingly, investors seek to achieve benefits of self-
enhancement and self-affirmation through WoM.
However, these benefits are dependent on confirming,
developing, and maintaining self-satisfaction, self-
esteem, personal worth, and effectiveness among com-
munity affiliates, which is gained only by engaging in
social interaction to develop, enhance or sustain social
capital (Alexandrov, Lilly, and Babakus 2013).
Specifically, the literature suggests that the self is formed
through interaction with others (Spencer, Fein, and
Lomore 2001). Social acceptance is an important motiv-
ation for individuals to engage in WoM (Chen 2017),
and depends on forming, developing, and strengthening
social relationships (Beck and Clark 2010).
Research on social norms suggests that social capital
development is meaningless without self-benefits
(Ostrom 2000). Similarly, self-motivation is shaped by
social considerations. For example, social interaction
induces investors to change their utility function with
reference to the affiliate outcome level (Wuthisatian,
Guerrero, and Sundali 2017). Similarly, investors prefer
to invest in the common choices (i.e., shared vision) in
a social group to self-enhance through WoM (Brown
et al. 2004; Brown et al. 2008). In addition, investors
prefer investment choices that are common among sib-
lings (Tokuoka 2017), neighbors (Ivkovi
c and
Weisbenner 2007; Zhang et al. 2018), coworkers (Hvide
€
and Ostberg 2015; Kaustia and Kn€ upfer 2012), and
peers (Bursztyn et al. 2014) because of the high level of
perceived trust on social community (Bougheas,
Nieboer, and Sefton 2013; Patacchini and Rainone
2017). The forming, developing, and strengthening
social-motives (i.e., social interaction ties, relational
trust, and shared vision) should be considered as the
actualization of social interaction. The actualization of
social-motives has no meaning without self, meaning
that evaluation of self-motives’ benefits precedes the
intention to engage in social interaction (Alexandrov,
Lilly, and Babakus 2013). Therefore, social considera-
tions which entail social capital development are meant
to satisfy self-motives. Investors first examine the impli-
cations of self-benefits through social capital benefits
and later engage in WoM.
Individuals (investors) engage in social interaction
that is driven by a desire to strengthen the existing
social relationship (with friends, which entails social-
motives) to seek emotional connection (Chen 2017) to
maintain self-image and ego. The propensity to seek
emotional connection (or self-affirmation) increases
with the enhanced desire for self-defense against losses
and associated negative reinforcement (Alicke and
Sedikides 2009). Hence, we argue that investors
engage in social considerations (or social-motives) and
use self-affirmation as self-defense.
H1a: The need to strengthen (i) social interaction ties,
(ii) relational trust, and (iii) shared trust is positively
affected by the need for self-affirmation.
In contrast, individuals (investors) engage in social
interaction which entails social consideration to attract
others into forming a social relationship (which fulfills
social-motives) to achieve the desire to self-enhance.
The propensity to self-enhancement increases with the
enhanced desire for social acceptance and to impress
strangers to expand social circle (Chen 2017). Hence,
we argue that investors engage in social considerations
(or social-motives) to achieve the desire to self-
enhancement.
H1b: The need to develop (i) social interaction ties,
(ii) relational trust, and (iii) shared trust is positively
affected by the need for self-enhancement.
Indirect effects of self-motives on the valence of
WoM via social-motives
The emotions shared through WoM differ based on
whether individuals are interacting with friends or
strangers but the main driver behind WoM remains

constant which is social consideration (Chen 2017).
Individuals are more likely to engage in self-enhanc-
ing interaction with strangers to form social relation-
ships (De Angelis et al. 2012; Wojnicki and Godes
2017) and emotionally connecting interaction (self-
affirmation) with friends to strengthen social relation-
ships (Chen 2017). This leads to the valence of WoM
and the difference between memories (Dubois,
Bonezzi, and De Angelis 2016) and experiences shared
with friends or strangers (Chen 2017). Distinct goals
drive this difference to protect friends and impress
strangers. Individuals tend to share PWoM to impress
strangers and NWoM with an intention to protect
and help friends (Dubois, Bonezzi, and De
Angelis 2016).
The attribution theory indicates that losses and
gains lead to different behavior. Individuals blame
others for failures and attribute successes to their self-
knowledge, ability, and experience (Bradley 1978). The
NWoM can be associated with losses because individ-
uals engage in NWoM to defend and sustain self-
identity among social group members. In doing so,
they tend to spread NWoM to justify failures by
blaming luck and destiny (Aydemir and Aren 2017).
Literature in WoM demonstrates that self-affirmers
tend to engage in NWoM to reduce cognitive disson-
ance (Steele and Liu 1983). Self-affirmation is used as
a coping mechanism to defend self-image to reduce
the effect of negative assessment by others (Spencer,
Fein, and Lomore 2001). On the other hand, PWoM
serves as means to achieve the motive of self-enhance-
ment (De Angelis et al. 2012; Sundaram, Mitra, and
Webster 1998). Hence, we presume a difference in the
underlying mechanism for NWoM and PWoM. The
NWoM is associated with avoiding and coping with
negative events, whereas PWoM is associated with
capitalizing on positive events.
Prospect theory states differences in investors’ later
risk-taking behavior after following prior losses and
gains, suggesting different underlying mechanisms to
cope or capitalize on the prior negative or positive
outcomes. Ahmad, Oriani, and De Angelis (2021)
confirmed differences in underlying mechanisms guid-
ing later risk-taking following prior losses or gains.
They find that investors tend to engage in NWoM (or
PWoM) to self-affirm (or self-enhance), following
losses (or gains) in prior decisions. In addition, invest-
ors seek to strengthen (or develop) components of
social-motives manifested in NWoM (or PWoM).
These findings indicate that investors seek to achieve
self-motives or/and social-motives manifested in
NWoM or PWoM, following prior losses or gains. As
JOURNAL OF BEHAVIORAL FINANCE 5
discussed above, WoM is a socially embedded activity,
and individuals (investors) seek to gain self-motives
by engaging in WoM but before that, they assess the
social benefits of engaging in WoM to achieve self-
motives (Alexandrov, Lilly, and Babakus 2013).
Therefore, we suggest that investors seek self-affirm-
ation to avoid the consequences of losses through
assessing social benefits to strengthen or sustain social
motives by engaging in NWoM. Hence,
H2a: The need to strengthen (i) social interaction ties,
(ii) relational trust, and (iii) shared trust positively
mediates the impact of self-affirmation on the need to
engage in NWoM.
On the other hand, PWoM can be associated with suc-
cess because individuals attempt to impress others by
spreading PWoM to enhance their positive self-image by
expanding their social circle. Hence, we predict that indi-
viduals (investors) self-enhance by engaging in PWoM
through forming social capital. Therefore,
H2b: The need to develop (i) social interaction ties,
(ii) relational trust, and (iii) shared trust positively
mediates the impact of self-enhancement on the need
to engage in PWoM.
Indirect effects of prior risk-taking on later risk-
taking via self-motives, social motives, and
valence of WoM
Investors engage in comparatively higher risk-taking
following prior losses than following gains when mak-
ing later decisions, termed escalation of commitment
(Staw 1976). This indicates that investors exhibit opti-
mistic (or pessimistic) expectations associated with
later expected outcomes and engage in low (or high)
risk aversion behavior following prior losses (gains).
Prospect theory predicts that investors engage in later
high risk-taking to (partly) overcome losses. The opti-
mistic expectations associated with expected gains out-
weigh the fear of subsequent losses because gains can
(partly) recover prior losses. Investors revise invest-
ment portfolios by including high-risk securities in
anticipation of gains (i.e., an overdue event; gambler
fallacy). Self-justification theory suggests that investors
do not need to justify their investment selection crite-
ria and choices (Staw 1976). They tend to self-affirm
and shift the blame of losses on market conditions,
luck, and destiny to reduce negative assessments by
the social circle. To do so, they spread NWoM to
defend their self-image and strengthen social motives.
Hence, we argue that following prior losses investors
seek self-affirmation to overcome negative assessment
of losses by others through social consideration to
6 F. AHMAD
strengthen social motives via spreading NWoM and
engaging in relatively high risk-taking. Therefore,
H3a: The need for self-affirmation, strengthen (i) social
interaction ties, (ii) relational trust, and (iii) shared
trust and NWoM positively mediates the impact of
prior low risk-taking on later high risk-taking.
However, investors exhibit high-risk aversion
behavior by reinvesting in perceived low-risk invest-
ment choices to capitalize on gains and continue posi-
tive returns (i.e., hot hand fallacy). Investors tend to
self-enhance by associating gains with self-ability,
knowledge, and experience to impress others and
increase social desirability through sharing PWoM. In
this way, investors capitalize on gains to form new
social interaction ties, develop relational trust, and
seek shared trust through PWoM. Therefore, we sug-
gest that following prior gains investors tend to
achieve self-enhancement through expanding social
desirability by sharing positive experiences via PWoM
and engaging in later low risk-taking.
H3b: The need for self-enhancement, forming (i) social
interaction ties, (ii) relational trust, and (iii) shared
trust and PWoM positively mediates the impact of
prior high risk-taking on later low risk-taking.
Data and method
We used data from Ahmad, Oriani, and De Angelis
(2021) to validate the triple serial mediation effect of
self-motives, social-motives, and valence of WoM on
the relationship between prior and later risk-taking
decisions. They conducted two experiments to validate
the double mediation effect of intrinsic motives and
valance of WoM on the association between prior low
(or high) risk-taking and later high (or low) risk-tak-
ing. Data was collected using Amazon Mechanical
Turk, a crowdsourcing platform used by studies to
collect quality data for research (e.g., Antonetti and
Maklan 2018; Shanahan, Tran, and Taylor 2019).
Participants willingly participated in the experiment
and received compensation after completion of the
experiment. Experiments consisted of two treatments
that are bearish and bullish market settings to induce
pessimistic and optimistic expectations, respectively
(Sokolowska and Makowiec 2017). A bearish (or bull-
ish) market setting suggests a downward (or upward)
trend of prices on the stock market (Preis, Schneider,
and Stanley 2011). The participants were randomly
distributed among bearish and bullish market settings.
Experiments were uploaded at different times and par-
ticipants were only allowed to participate in one
experiment to avoid multiple submissions.
Participants were provided a detailed description of
each experiment along with the bearish or bullish
market settings, which consist of clear, explicit, and
limited macroeconomic information (i.e., GDP,
unemployment, interest rate, and stock market per-
formance). In addition, clear instructions were given
that experiments are only for participants having prior
stock market investment experience and social net-
working site accounts. Two screening questions on
prior stock market investment experience and social
networking site accounts were added to ensure that
participants had prior investment experience, implying
greater ecological validity and generalizability of find-
ings (Weber, Weber, and Nosi
c 2013). According to
gratification theory, individuals use media to gratify
specific needs and wants in a timely and efficient
manner (Ko, Cho, and Roberts 2005). Social network-
ing sites are widely used as media for opinion and
experience sharing because of their wide reach, instant
feedback, and opportunity to expand social circles.
Therefore, Ahmad, Oriani, and De Angelis (2021)
considered WoM senders sharing investment opinions
and experience in the form of the valence of WoM on
social networking sites. Pilot studies were conducted
to validate that market setting induced optimistic and
pessimistic expectations in the participants. In this
study, we employed experiment 2 data of Ahmad,
Oriani, and De Angelis (2021).
Materials and measures
An autobiographical emotional memory task was
employed by Ahmad, Oriani, and De Angelis (2021)
to induce pessimistic expectations (negative emotions)
or optimistic expectations (positive emotions) in the
participants.4 In this method, participants are required
to write desired emotional experiences in a short
essay. An autobiographical task is a popular method
of inducing desired emotion because it is easy to
implement in laboratory and real-world settings, does
not require expert writing skills and takes less than
10 minutes to complete a task. It is important to note
that the autobiographical emotional memory task was
employed to induce anticipated positive (PWoM) or
negative (NWoM) emotions, not incidental emotions
of the valence of positive or negative emotions (e.g.,
joy, happiness, anger, and fear).
In the first part of the experiment, participants
were instructed to share prior loss (or gain) invest-
ment experiences in bearish (or bullish) market set-
tings to induce negative (or positive) emotions. In
addition, participants were also required to provide

investment opinions that they had shared on social
networking sites for provided investment experience.
The second part of the experiment consisted of ques-
tions related to the measures derived from existing lit-
erature. According to Weber, Weber, and Nosi
c
(2013), prior risk-taking was measured as a percentage
of total wealth invested in the shared experience. The
percentage of wealth invested in prior loss (or gain)
investment experience in bearish (or bullish) market
settings measures low (or high) risk-taking. Two self-
motives that are self-enhancement and self-affirmation
were measured using six and five items measured by
Yun, Takeuchi, and Liu (2007) and Napper, Harris,
and Epton (2009), respectively. Three dimensions of
social-motives which are social interaction ties, rela-
tional trust, and shared vision were measured using
four, five, and three items of Chiu, Hsu, and Wang
(2006), respectively. PWoM and NWoM were meas-
ured using Alexandrov, Lilly, and Babakus (2013)
scale consisting of three items for each construct. All
measures were adapted to the context of portfolio
decision-making.
Procedure
At the beginning of the experiment, participants were
informed that the experiment was divided into two
parts: an autobiographical emotional memory task fol-
lowed by survey questions. Participants were provided
economic descriptions of bearish or bullish market
settings in the first part and a few screening questions.
Participants were instructed to share prior loss (or
gain) investment experience in the context of bearish
(or bullish) market settings. At the end of an autobio-
graphical task, participants were required to share the
percentage of wealth they had invested in the invest-
ment choice mentioned.
In the second part, participants were instructed to
respond to survey questions while considering the
above-mentioned investment experience. Survey ques-
tions included self-enhancement, self-affirmation,
social interaction ties, relational trust, shared vision,
and NWoM/PWoM. The only difference between the
bearish and bullish market settings survey was
the likelihood of sharing NWoM and PWoM, and the
bearish (or bullish) market setting survey measured
likelihood of sharing NWoM (or PWoM).
Participants
The initially collected responses for the bearish and
bullish market settings were 260 and 278, respectively.
JOURNAL OF BEHAVIORAL FINANCE 7
Four data checks were used to ensure the validity of
the sample. Data checks were: having prior stock
investment experience or not, having social network-
ing account or not, response to market setting-related
screening questions, and completion time of the
experiment. We restricted participants to spend a
minimum of five minutes on an autobiographical task,
and responses with a completion time equal to or less
than six minutes were dropped. Furthermore, to
ensure that respondents have seriously done an auto-
biographical task, responses were manually checked,
and responses were retained that provided brief
description (on average 50 words) of respective nega-
tive (bearish market) or positive (bullish market)
investment experiences.5
The final sample for bearish and bullish market set-
tings were 228 and 251 respondents, respectively. The
age distribution for both market settings ranged from
20 years to 60 years. The final sample for bearish mar-
ket settings consisted of 59.2% male and 40.8% female
respondents with a mean age of 35.71 years (SD ¼
10.56). The age distribution was right-skewed, with
61.4% of respondents younger than the mean age. A
total of 85.55% reported bachelor’s or higher degree
as their highest achieved education level.
The final sample for bullish market setting con-
sisted of 57.4% male and 42.6% female with a mean
age of 33.98 years (SD ¼ 10.08). The age distribution
was right-skewed with 58.2% of respondents on the
left side of the mean age. A total of 81.3% reported
having a bachelor’s or higher degree as their highest
education level. The data collected was fairly normally
distributed because all indicators’ skewness and kur-
tosis values were lower than three times the standard
error values (Sposito, Hand, and Skarpness 1983).
Results
The PROCESS tool model 66 analysis was used to val-
idate serial mediation hypotheses 2a, 2b, 3a, and 3b.
Ahmad, Oriani, and De Angelis (2021) checked and
confirmed the dimensionality, reliability, convergent,
and discriminant validity of the observed variables
using exploratory factor analysis and confirmatory fac-
tor analysis.7 Table 1 reports the empirical results of
this study.
The imputed variables were used to check the dir-
ect effect of self-motives on social-motives. The results
supported the direct effect of self-affirmation on social
interaction ties (b ¼ 0.427, 95% CI [0.310, 0.544]),
relational trust (b ¼ 0.433, 95% CI [0.313, 0.553]), and
shared vision (b ¼ 0.449, 95% CI [0.352, 0.546]) in the
8 F. AHMAD

Table 1. Test of research hypotheses.

Hypothesis Bearish treatment Bullish treatment
b, 95% [LLCI, ULCI] b, 95% [LLCI, ULCI]
H1a(i) SA!SIT 0.427 [0.310, 0.544]
H1a(ii) SA!T 0.433 [0.313, 0.553]
H1a(iii) SA!SV 0.449 [0.352, 0.546]
H1b(i) SE!SIT 0.077 [-0.042, 0.195]
H1b(ii) SE!T 0.251 [0.138, 0.364]
H1b(iii) SE!SV 0.476 [0.390, 0.562]
H2a(i) SA!SIT!NWoM 0.093 [0.059, 0.139]
H2a(ii) SA!T!NWoM 0.128 [0.089, 0.175]
H2a(iii) SA!SV!NWoM 0.107 [0.065, 0.158]
H2b(i) SE!SIT!PWoM 0.018 [0.009, 0.050]
H2b(ii) SE!T!PWoM 0.040 [0.017, 0.076]
H2b(iii) SE!SV!PWoM 0.101 [0.043, 0.169]
H3a(i) LRT! SA!SIT !NWoM!HRT 14.384 [8.432, 22.864]
H3a(ii) LRT!SA!T !NWoM!HRT 14.773 [8.875, 24.406]
H3a(iii) LRT!SA!SV !NWoM!HRT 14.126 [8.545, 22.657]
H3b(i) HRT!SE!SIT !PWoM!LRT 4.557 [2.609, 6.716]
H3b(ii) HRT!SE!T !PWoM!LRT 5.124 [2.933, 7.793]
H3b(iii) HRT!SE!SV !PWoM!LRT 4.583 [2.714, 6.766]
In the table, LRT stands for low risk-taking, HRT for high risk-taking in later decision-making, NWoM for negative word-of-
mouth, PWoM for positive word-of-mouth, SA for self-affirmation, SE for self-enhancement, SIT for social interaction ties, T
for relational trust, and SV for shared vision.
b is the direct effect coefficient, and ab is the indirect effect coefficient.
LLCI is the lower level of confidence interval, and ULCI is the upper level of confidence interval.
95% confidence interval to test the significance of all indirect effects.
Significant effects are given in bold font.
All hypotheses were tested by controlling for age and gender.

bearish market settings, confirming hypothesis 1a (i,
ii, iii). The results in table 1 shows significant positive
effect of self-enhancement on relational trust
(b ¼ 0.251, 95% CI [0.138, 0.364]), and shared vision
(b ¼ 0.476, 95% CI [0.390, 0.562]) in the bullish mar-
ket settings, confirming hypothesis 1 b (ii, iii).
However, results provide an insignificant effect of self-
enhancement on social interaction ties. The direct
effects were confirmed by bootstrapping at a confi-
dence interval of 95%. The results indicate that indi-
viduals evaluate the self-benefits of strengthening or
developing social capital to engage in a socially
embedded activity. It is important to note that results
show a significant negative direct effect of self-
enhancement (insignificant effect of self-affirmation)
on social interaction ties, relational trust, and shared
vision in the bearish (bullish) market settings (see
table 2).
The results in Table 1 supported a significant posi-
tive indirect effect of social interaction ties (ab ¼
0.093, 95% CI ¼ [0.059, 0.139]), relational trust (ab ¼
0.128, 95% CI ¼ [0.089, 0.175]), and shared vision (ab
¼ 0.107, 95% CI ¼ [0.065, 0.158]) on the relationship
between self-affirmation and NWoM in the bearish
treatment. The results showed a significant positive
indirect effect of self-enhancement on PWoM via rela-
tional trust (b ¼ 0.040, 95% CI ¼ [0.017, 0.076]), and
self-enhancement on PWoM via shared vision
(b ¼ 0.101, 95% CI ¼ [0.043, 0.169]) in the bullish
treatment. Hence, this confirmed the hypotheses 2a (i,
ii & iii) and 2b (ii & iii). The significance of the indir-
ect effect is confirmed using bootstrapping at a confi-
dence interval of 95%. This indicated that investors
engage in NWoM to achieve self-affirmation through
strengthening social interaction ties, relational trust,
and shared vision in the loss domain, while investors
engage in PWoM to gain self-enhancement via devel-
oping relational trust and shared vision in the gain
domain. In addition, results provide a significant
negative effect of self-enhancement (insignificant effect
of self-affirmation) on social interaction ties, relational
trust, and shared vision in the bearish (bullish) market
settings (see Table 2).
The results confirmed hypotheses 3a (i, ii & iii) by
showing a significant positive triple serial mediation
effect of self-affirmation, social interaction ties and
NWoM (ab ¼ 14.384, 95% CI ¼ [8.432, 22.864]), self-
affirmation, relational trust and NWoM (ab ¼ 14.773,
95% CI ¼ [8.875, 24.406]), and self-affirmation,
shared vision and NWoM (ab ¼ 14.126, 95% CI ¼
[8.545, 22.657]) on the relationship between prior low
risk-taking and later high risk-taking in the bearish
treatment. The results showed significant positive tri-
ple mediation effect of self-enhancement, social inter-
action ties and PWoM (ab ¼ 4.577, 95% CI ¼ [2.609,
6.716]), self-enhancement, relational trust and PWoM
(ab ¼ 5.124, 95% CI ¼ [2.933, 7.793]), self-enhance-
ment, shared vision and PWoM (ab ¼ 4.583, 95% CI
¼ [2.714, 6.766]) on the relationship between prior
high risk-taking and later low risk-taking in the

Table 2. Direct & indirect effects.
Bearish treatment ab, 95% [LLCI, ULCI]
SE!SIT 20.404 [20.590, 20.217]
SE!T 20.330 [20.524, 20.136]
SE!SV 20.247 [20.413, 20.080]
SA!SIT
SA!T
SA!SV
SE!SIT!NWoM 20.137 [20.218, 20.069]
SE!T!NWoM 20.133 [20.216, 20.055]
SE!SV!NwoM 20.100 [20.183, 20.036]
SA!SIT!PWoM
SA!T!PWoM
SA!SV!PwoM
n the table, NWoM for negative word-of-mouth, PWoM for positive word-of-mouth, SA for self-affirmation, SE for self-enhance-
ment, SIT for social interaction ties, T for relational trust, and SV for shared vision.
b is the direct effect coefficient, and ab is the indirect effect coefficient.
LLCI is the lower level of confidence interval, and ULCI is the upper level of confidence interval.
95% confidence interval to test the significance of all indirect effects.
Significant effects are given in bold font.
All effects were tested by controlling for age and gender.
bullish treatment. This confirmed that an investor’s
decision to engage in later high risk-taking is activated
by self-affirmation through strengthening their social
resources manifested in NWoM in the loss domain.
In contrast, an investor’s decision to engage in later
low risk-taking is motivated by self-enhancement
achieved through developing social capital reflected in
PWoM in the gain domain.
Discussion and conclusion
Overall, results support the viability of the proposed
model that investors seek to achieve self-motives and
social-motives manifested in PWoM or NWoM, fol-
lowing gains or losses in the prior decisions. Of the
six sub-hypotheses, four hypotheses were fully sup-
ported while two sub-hypotheses were partially sup-
ported. One important finding is that WoM is a
socially embedded process, investors first evaluate
social benefits (strengthening existing components of
social capital or developing new components of social
capital) to achieve self-motives via engaging in PWoM
or NWoM, following prior gains or losses. This is
consistent with the concept of "social finance" popu-
larized by Hirshleifer (2020), which highlights the
importance of social processes in shaping the eco-
nomic and financial decisions of households and firms
(Kuchler and Stroebel 2021). We extend the findings
of Ahmad, Oriani, and De Angelis (2021) and provide
that investors desire to seek underlying social-motives
through self-motives manifested in PWoM or NWoM.
Investors seek to self-affirm to overcome negative
assessments by strengthening social-motives through
engaging in NWoM, following prior losses. While
investors seek to self-enhance to associate positive
JOURNAL OF BEHAVIORAL FINANCE 9
Bullish treatment ab, 95% [LLCI, ULCI]
0.436 [0324, 0.548]
0.129 [0.007, 0.251]
0.113 [0.003, 0.222]
0.077 [0.212, 0.058]
0.019 [0.101, 0.140]
0.005 [0.108, 0.098]
performance with self-abilities to increase social desir-
ability through sharing PWoM, following prior gains.
Four important conclusions were drawn from the
results. First, the investor’s desire to seek self-motives
and social-motives are inherently intertwined, which
implies that investors first evaluate the self-benefits of
engaging in social interaction to either strengthen
existing components of social-motives or to extend
(develop) components of social-motives. Investors
engage in WoM to achieve motives of self-affirmation
and self-enhancement, but these benefits depend on
improving or developing components of social capital
among social community affiliates. Therefore, the
actualization of self-motives without evaluating the
social benefits of self-affirmation or self-enhancement
has no meaning, which confirms that the realization
of self-motives precedes intention to engage in social
capital development. Our findings are aligned with
prior findings in the literature that social acceptance
is the important motivation to engage in WoM (Beck
and Clark 2010). The self is formed through inter-
action with others (Spencer, Fein, and Lomore 2001),
and the realization of social-motives has no meaning
without self-benefits (Alexandrov, Lilly, and Babakus
2013; Ostrom 2000) has been established.
Second, later high and low risk-taking is activated
by a different underlying mechanism which consists
of the investor’s desire to develop (or strengthen)
components of social-motives via self-affirmation (or
self-enhancement) manifested in NWoN (or PWoM).
This outlines the motivation of investors to engage in
NWoM or PWoM in the loss or gain domain. In the
loss domain, investors seek to self-affirm to strengthen
existing components of social-motives manifest in
NWoM and shift the blame of their losses on luck
and market conditions (Aydemir and Aren 2017). The
10 F. AHMAD
negative information is perceived as more credible
and trustworthy, strengthening shared vision among
social network ties (Pan and Chiou 2011). Investors
seek to strengthen existing social relationships through
strong interaction ties, relational trust, and shared
vision via sharing negative opinions manifested in
NWoM to validate their investment strategy. It helps
investors to sustain their self-image, self-satisfaction,
and self-esteem and seek cognitive clarity to overcome
cognitive dissonance (Steele and Liu 1983). To do so,
investors employ self-affirmation as a self-defense
mechanism to strengthen interaction ties, relational
trust, and shared vision via sharing NWoM to show
that bad performance is not due to their self-abilities
but due to uncontrollable external factors. Consistent
with the self-justification hypothesis, investors associ-
ate losses with other uncontrollable factors, feel no
need to justify their investment strategies and engage
in high risk-taking to offset prior losses (Staw 1976).
In the gain domain, investors seek social desirability
in the form of developing interaction ties, relational
trust, and shared vision by associating gains with self-
abilities (Alexandrov, Lilly, and Babakus 2013). They
self-enhance by sharing PWoM to enhance positive
self-image and social standing (Kirk, McSherry, and
Swain 2015). In doing so, investors express psycho-
logical ownership of gains, provide emotional support,
and develop shared values by exchanging PWoM.
Third, the triple serial mediation effect explains
individuals’ significant time and efforts to draft and
share investment-related experiences and opinions on
online social networking sites. Findings indicate that
the underlying motive behind sharing NWoM is to
seek investment opinion confirmation and emotional
support to strengthen further interaction ties, rela-
tional trust, and shared vision in the social circle. On
the other hand, the underlying motive behind PWoM
is to increase investor social desirability through posi-
tive self-affirmation on social networking sites. In this
way, investors expand their social circle by developing
new interaction ties, and relational trust, and attract-
ing others with a similar shared vision to follow their
investment strategy. Existing literature supports the
“helping others perspective” of WoM (Hong, Kubik,
and Stein 2004), but the underlying objective is to
seek social-motives through self-motives and not to
help or support others in sequential decision-making.
Consistent with Chen (2017), the potential desire to
help others may be fundamentally self-serving.
Finally, results provide different underlying mecha-
nisms to explain investor risk-attitude changes follow-
ing prior losses or gains. In the loss domain, investors
exhibit low risk-averse behavior and engage in high
risk-taking to (partly) offset the prior losses because
subsequent losses hurt less than gains. The investment
is high risk choices suggest that investors strive to sus-
tain their social-motives through self-affirmation and
invest additional funds to generate higher returns
and show that their investment strategy is correct and
prior losses were due to uncontrollable factors. In the
gain domain, investors reinvest in perceived low risk
market-driven stocks to continue positive returns. In
this way, investors self-enhance by expanding social-
motives and suggesting others follow their invest-
ment strategies.
The findings of this study provide significant impli-
cations for researchers, managers, financial advisors,
and analysts. First, rational investment models con-
sider economic benefits as the main motivation to
participate in the stock market. Similarly, classic eco-
nomic behavior models do not account for intrinsic
motives (i.e., self-motives and social-motives) as pre-
dictors of individual behavior. However, our findings
confirm that investors’ desire to seek self-motives and
social-motives strongly influence changing risk-taking
behavior. Consistent with the concept of "social
finance" introduced by Hirshleifer (2020), social inter-
action (valence of WoM) influences investors’
decision-making in the context of sequential decision-
making. Therefore, individual investors, researchers,
managers, financial advisors, and analysts cannot
overlook the importance of intrinsic factors in predict-
ing and modifying individual risk-taking behavior.
Researchers should integrate the role of social inter-
action and intrinsic motives into economic behavior
models. Similarly, asset pricing models should account
for economic benefits as well as self-benefits and
social-benefits. In addition, investment performance
assessment models should also incorporate psycho-
logical and social-benefits to assess investor
performance.
Second, findings suggest that individuals are psy-
chologically and socially different from one another.
Clients seek to invest in specific stocks to gain par-
ticular self-motives and social-motives. Therefore,
financial advisors should include questions related to
clients’ preferences to seek self-motives and social-
motives in the initial client-related information survey.
Similarly, advisors need to understand self and social
factors that change clients’ risk attitude. In this way,
financial advisors may understand the client’s invest-
ment underlying motives to frame investment advice
to achieve particular self-motives and social-motives
by modifying their portfolios. Financial advisors can

also prevent clients from taking higher risk-seeking in
the loss domain and risk-averse behavior in the gain
domain by framing investment advice as lowering or
strengthening self-motives and social-motives.
As identified by Ahmad, Oriani, and De Angelis
(2021), the main limitation of this study is the use of
an online platform to collect data. One might argue
that there is a lack of control over participants.
Therefore, future research can replicate the findings of
this study using laboratory-based experiments or real-
time individual investors data from financial institu-
tions or brokers.
Notes
1. Social interaction in the form of WoM engages both
sender and receiver. The WoM sender shares
investment experiences and opinions and seeks positive
evaluation to achieve a greater level of self-
determination. Whereas the WoM receiver pursues
investment-related information. Hereafter, investors
sharing WoM are termed as WoM-sender, and
investors seeking information are referred to as WoM-
receiver. According to the uses and gratification theory,
individuals seek a specific media that can fulfill their
needs efficiently and effectively (Ko, Cho, and Roberts
2005). Web-based online social networking sites are
most widely used to share unbiased experiences and
opinions in the form of electronic WoM. Such
platforms provide WoM-sender the opportunity to
write (publish) opinions and allow WoM-sender to read
other consumers’ experiences, as well as allow them to
contribute by themselves (Hennig-Thurau et al. 2004).
Therefore, this study assumes WoM-sender sharing
WoM and WoM-receiver following other investors’
opinions and experiences on social networking sites as
the settings of the study.
2. The valence of WoM consists of negative WoM
(NWoM) and positive WoM (PWoM). The NWoM
(PWoM) represents sharing of negative (or positive)
opinions related to investment experience on social
networking sites.
3. This study extends the model of Ahmad, Oriani, and
De Angelis (2021) therefore only three hypotheses are
developed in this study. For theoretical justification of
other direct and indirect effects, refer to the theory
development and hypothesis section of Ahmad, Oriani,
and De Angelis (2021).
4. Following are two specific autobiographical task
questions that were asked to the participants to provide
negative or positive investment experience.
Task question to share negative investment experience:
“Please write a short description of your NEGATIVE
outcome investment experience in the stock market
under BEARISH market settings. (Short description can
incorporate how you selected stocks, why prices went
down, how you felt with your loss, with whom you
shared your NEGATIVE investment experience, and
JOURNAL OF BEHAVIORAL FINANCE 11
you can mention any social media message that you
shared with family, friends or with others related to
your NEGATIVE investment experience).”
Task question to share positive investment experience:
“Please write a short description of your POSITIVE
outcome investment experience in the stock market
under BULLISH market settings. (Short description can
incorporate how you selected stocks, why prices went
up, how you felt with your gain, with whom you shared
your POSITIVE investment experience, and you can
mention any social media message that you shared with
family, friends or with others related to your POSITIVE
investment experience).”
5. For instance, consider following two responses for
bearish and bullish market settings that were retained
in the sample.
Example 1 (loss experience): “Our experience was in
2008 or 2009 when lot of people lost money. My
husband and I had our retirement money in stocks
with a company that we trusted. Our finance man did
not contact us or give us any information as to what to
do when stocks went way low. We were losing over half
of our retirement money and were quite worried. We
went to our finance man’s office and told him we
wanted our money that was left. We lost over one half
our retirement savings. We were absolutely devastated.”
Example 2 (Gain experience): “It was my first
investment experience. Stock market was booming, and
I decided to invest in it. Initially I invested 300,000 and
bought shares on the recommendation of my friend.
With market the value of my stocks also raised. I
shared my positive experience with my family and
friends.”
Following are examples of two responses that were
dropped from the analysis.
Example 1 (loss experience): “Lost $3000, extremely
desperate, shared with friends and family.”
Example 2 (gain experience): “My stocks were selected
on my behalf by a third party.”
6. PROCESS tool model 6 allows for the indirect effect of
multiple mediators in serial.
7. For detailed results and discussion refer to experiment
2 results of Ahmad, Oriani, and De Angelis (2021).
Disclosure statement
There is no declaration of interest.
ORCID
Fawad Ahmad http://orcid.org/0000-0002-0631-3935
Data availability statement
Data will not be provided with the manuscript on publica-
tion but can be shared on request.
12 F. AHMAD
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