THE MODERATING EFFECTS OF AI TRUST & AI INNOVATION ON THE INFLUENCE OF EMOTIONAL BIASES AND ANCHORING BIASES IN AI-SUPPORTED INVESTMENT DECISIONS

Abstract

In the ever-changing environment of the financial market, individual investors are facing challenges. At the same time, artificial intelligence (AI) and its associated tools are increasingly applied in investment decisions, and behavioral biases are deeply ingrained in human decision processes. This paper examines the impact of two significant biases including emotional bias and anchoring bias on investment decisions. Additionally, it explores how AI trust and AI innovation influence these decisions and moderate their effects. Based on the theory of behavioral finance, the study utilizes quantitative data from a sample group of 349 retail investors and employs regression and moderation techniques through the Hayes PROCESS macro.  The results indicate that both emotional (beta = -0.285, p < 0.001) and anchoring biases (beta = -0.267, p < 0.001) have a significant negative influence on investment decisions, confirming the idea that cognitive limitations exist even in tech-savvy settings. Conversely, the AI trust (0.221, p < 0.001) and the AI innovation (0.226, p < 0.001) bring a significant contribution to the quality of investment decisions, which proves the innovative system's efficiency in favoring rational behavior.  The moderation analysis showed that although AI trust moderated anchoring bias significantly (beta = 0.085, p = 0.038), it did not significantly moderate emotional bias (beta = 0.068, p = 0.156) But the moderation analysis also showed that AI innovation does not weaken the effect of anchoring bias (beta = -0.024, p = 0.583) and emotional bias (beta = 0.041, p = 0.394) on decision outcomes.  The given study adds to the debate in the realm of behavioral finance, human psychology, and fintech, providing worthwhile findings to the concepts of an investor, a financial consultant, and AI developers. The dual role of human psychology and technological progress in it underlines the necessity of a combined and innovative approach that should be based on emotional understanding and digital technology to ensure more informed and objective investment behavior