Effect of Psychological Factors and Financial Behavior on Financial Well-being of Equity Investors in Sri Lanka

This paper examines the effect of psychological factors and financial behavior on the financial well-being of individual equity investors in Sri Lanka. It draws upon the multi-theoretical linkage of social cognitive, prospect, and self-efficacy theories. The study uses survey data from 389 individual equity investors registered at the Colombo Stock Exchange. The results show that financial risk tolerance negatively impacts financial well-being, suggesting that those who are more willing to take risks have lower financial well-being. Results also show that financial behavior positively affects financial well-being. Our findings provide valuable information to the stock market participants, government, and other policymakers to understand the key determinants of financial well-being and identify the most critical areas of financial management practices to enhance the financial well-being of individual equity investors in Sri Lanka.