This study examines the association between investors' use of social and traditional media, investment knowledge, and trading frequency. It also investigates whether investment knowledge mediates the relationship between media use and trading frequency.
Using data from the 2021 FINRA Investor Survey merged with the 2021 National Financial Capability Study (NFCS) State Survey, the study employs multivariate regression and mediation analyses to test the proposed relationships.
Relying on social media for investment selection decisions is positively associated with subjective investment knowledge but negatively associated with objective investment knowledge. Traditional media use is positively associated with both objective and subjective investment knowledge. Both social media use for investment information seeking and traditional media use are associated with higher trading frequency. Objective investment knowledge negatively mediates the relationship between social media use and investor trading frequency.
The cross-sectional nature of the data limits causal inference. Future research can use longitudinal or experimental designs to analyze changes over time.
Financial service professionals, advisors, and regulators should emphasize critical evaluation skills for their clients and consumers, alongside investment knowledge, in the current digital finance and social media environments.
The findings underscore the potential for social media to foster overconfidence and excessive trading, with implications for financial well-being and consumer protection.
This study advances our understanding of media use and trading behavior by distinguishing the mediating roles of subjective and objective investment knowledge in media-driven investor decision-making.
