Abstract

Economic and financial theories presume that individuals make decision based on bounded rationality, by taking into all the available information. Economists believe in classic models of rational market behaviour in decision making process and so do not consider irrational behaviour. The fact that uncertainty causes people to make irrational decisions, however, shows that there is an element lacking from traditional theories of rational market behaviour. Therefore, it is essential to carry out study on the behavioural aspects that affect people’s decision-making in developing countries like Malaysia, which previous studies have neglected. This study fills in the gaps in the literature by looking at the major five behavioural traits (Openness, Conscientiousness, Extraversion, Agreeableness, and Neuroticism- OCEAN) and how they affected the portfolio allocation decision in five Malaysian states during the COVID-19 outbreak. The findings indicate that Openness and Agreeableness have a statistically significant positive relationship with investors’ decisions regarding portfolio allocation and that COVID-19 does mediate the cause-and-effect relationship between OCEAN and decision-making. A total of 199 survey questionnaires were collected through random sampling and analysed using SPSS and SPSS AMOS. Structural equation modelling (SEM) was used to validate the measurement model and test the hypothesis.