Emotional investing in India: the importance of clear communication

The paper contributes to the famous “stock-market participation puzzle” by highlighting the interplay of the readability of disclosure documents and emotions in driving investment intention in a mutual fund. The study uses partial least squares structural equation modeling to link the theory of planned behavior along with the emotion of affect to the intention to invest in a mutual fund. We study the relationship using an experimental approach while incorporating the readability of the mutual fund’s disclosure document. Affect, attitude and subjective norms significantly influence investment intentions. Affect emerges as the strongest predictor, irrespective of the readability of financial disclosures. However, attitude plays a larger role under low-readability conditions, while subjective norms significantly influence intentions when disclosures are highly readable. This is the first-of-its-kind experimental study that links the readability of disclosure documents and emotions to investment behavior. Further, the findings highlight investment decisions’ emotional and cognitive dimensions, offering policy and practical insights.