Measuring contextuality in investment preferences

Abstract

Abstract This study investigates the role of contextuality in investment preference formation, specifically in global investments and major US stocks. Utilizing the "Contextuality by Default" framework (Dzhafarov and Kujala in PLoS ONE 8:e61712, 2013; J Math Psychol 74:11–33, 2016), we measure contextuality within a cyclic system of random variables. Through two experiments, each with four context stimuli, we assess contextuality across various decision-making scenarios. Our results indicate the presence of "true" contextuality in global investment decisions, but not in US stock selections. We investigate the determinants of contextual preference formation, focusing on factors such as future return expectations, risk perception, and familiarity with stock markets and individual US stocks. Employing logistic regression analysis for the first two contexts, we find that preferences in foreign stock markets exhibit instability, indicating context-specific drivers. On the other hand, familiarity with individual companies and future return expectations consistently influence investment preferences in specific US stocks.

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