Cognitive biases, risk perception, and investment decision-making under information asymmetry: A moderated mediation study

Investment decisions in emerging markets are often made under conditions of incomplete, uncertain, and difficult to verify information. This study explored the relationship between anchoring bias, framing bias, and investment decision-making through risk perception and whether the association between risk perception and investment decision-making varied across levels of information asymmetry. A cross-sectional survey study of individual investors on the Pakistan Stock Exchange, with a sample of 620, was conducted, and a second-stage moderated mediation model was tested. The reliability, convergent validity, and discriminant validity of the five-factor measurement model were supported by CFA. The findings showed that both anchoring and framing biases were positively associated with risk perception, which was positively associated with investment decision-making. Bootstrap analysis also confirmed the indirect associations between the anchoring and framing biases and the investment decision-making process through risk perception. The results of PROCESS Model 15 revealed that the indirect associations of these were significant at the medium and high levels of information asymmetry, but not at the low level. The findings suggest that biased risk appraisals are more strongly associated with investment decision-making when reliable information is limited and external cues for checking investors' judgments are scarce. The study contributes to psychological research on decision-making by showing how reference points, information framing, subjective risk appraisal, and the broader information environment are associated with investors' judgments in an emerging-market context. As the data are cross-sectional, the findings should be interpreted as conditional associations rather than evidence of causality.