Social Media’s Influence on

Investment Decisions
A qualitative study based on an
individual’s financial literacy
Lucas Chapman, Julia Pettersson

Department of Business Administration

International Business Program
Bachelor Thesis, 15 Credits, Spring 2021
Supervisor: Dennis Sundvik
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 Abstract

With the current technological trends pointing to people having more capabilities to
independently manage their financial future, the financial knowledge a person possesses
will become evermore essential to create a sustainable financial future. Simultaneously, the
growth of social media platforms and users have substantially increased over the past ten
years, which has allowed people to find and create countless types of content. The potential
problem culminating from these trends is that people who do not have the necessary
financial knowledge to make educated investment decisions will have the opportunity to do
so. Furthermore, if people have a lack of understanding about financial concepts,
supplementing their lack of knowledge with information and recommendations from social
media could lead to people making investment decisions based on unknown individuals'
opinions. As a result, this study aims to determine if there is a connection between the
financial literacy a person possesses and the usage of social media. We found that the
financial literacy of university students in Sweden was not a determinant of social media
influences on their investment decisions. Despite this overall conclusion, it was apparent
that every participant in this study had been influenced by social media in some capacity
when making investment decisions whether they intentionally or unintentionally used social
media as a reference or unexpected circumstance.

Keywords: Social Media, Investment Decisions, Financial Literacy, Risk Tolerance

 Acknowledgements

Firstly, we would like to thank Umeå School of Business, Economics & Statistics for three
wonderful academic years, and for providing a great environment and the necessary tools
for us complete this thesis.

We would like to show a special gratitude to our Supervisor Dennis Sundvik who has
supported and guided us throughout this entire process giving us constructive criticism to
make sure the thesis is the best to its ability.

Lastly, we would also like to thank every participant that kindly agreed to participate in
this study and highly value the time you took out of your schedules and the effort you
devoted with providing valuable inputs during the interview process.

20-05-2021
Umeå, Sweden

JULIA PETTERSSON LUCAS CHAPMAN

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TABLE OF CONTENTS
1 INTRODUCTION ................................................................................. 1
1.1 PROBLEM BACKGROUND .......................................................................... 1
1.2 THEORETICAL BACKGROUND AND RESEARCH GAP .................................. 2
1.3 RESEARCH QUESTION............................................................................... 4
1.4 PURPOSE AND MAIN FOCUS OF RESEARCH ............................................... 4
1.5 DELIMITATIONS........................................................................................ 4
1.6 DISPOSITION ............................................................................................. 5
2 SCIENTIFIC METHODOLOGY ......................................................... 6
2.1 PHILOSOPHICAL FOUNDATION & METHOD ............................................... 6
2.2 RESEARCH PHILOSOPHY ........................................................................... 7
2.2.1 Ontology ........................................................................................... 7
2.2.2 Epistemology .................................................................................... 7
2.2.3 Axiology ............................................................................................ 8
2.3 RESEARCH APPROACH ............................................................................. 8
2.4 RESEARCH METHOD................................................................................. 9
2.5 RESEARCH DESIGN ................................................................................. 10
2.6 ETHICAL CONSIDERATION ...................................................................... 11
3 THEORETICAL FRAMEWORK ...................................................... 12
3.1 FINANCIAL LITERACY ............................................................................ 12
3.1.1 Numeracy........................................................................................ 13
3.1.2 Financial and Mathematical Anxiety ............................................. 13
3.1.3 Gender ............................................................................................ 14
3.1.4 Educational Background ................................................................ 14
3.1.5 Measuring Financial Literacy ........................................................ 14
3.2 RISK TOLERANCE ................................................................................... 15
3.3 SOCIAL MEDIA ....................................................................................... 16
3.3.1 Instagram........................................................................................ 17
3.2.2 TikTok ............................................................................................. 18
3.2.3 Twitter ............................................................................................ 18
3.2.4 Reddit.............................................................................................. 18
3.4 SOCIAL MEDIA’S EFFECT ON DECISION MAKING ...................................... 19
4 PRACTICAL METHODOLOGY....................................................... 21
4.1 DATA COLLECTION AND SAMPLE ........................................................... 21
4.2 LITERATURE SEARCH PROCESS .............................................................. 22
4.3 FINANCIAL LITERACY TEST.................................................................... 23
4.4 INTERVIEW ............................................................................................. 25
4.5 DATA ANALYSIS .................................................................................... 28
5 EMPIRICAL RESULTS ..................................................................... 29
5.1 FINANCIAL LITERACY TEST.................................................................... 29
5.2 INTERVIEW RESULTS .............................................................................. 30
5.2.1 Investment Decisions ...................................................................... 30
5.2.2 Source of Financial Information or Recommendations ................. 33
5.2.3 Social Media Usage & Influence.................................................... 36
6 DISCUSSION ...................................................................................... 40
6.1 FINANCIAL LITERACY ............................................................................. 40
6.2 SOCIAL MEDIA ........................................................................................ 42
6.3 ALTERNATIVE GROUPINGS ..................................................................... 43
7 CONCLUSION AND RECOMMENDATIONS ................................. 45
7.1 THEORETICAL & PRACTICAL CONTRIBUTION ......................................... 45
7.2 SOCIETAL AND ETHICAL IMPLICATIONS ................................................. 46
7.3 LIMITATIONS AND FURTHER RESEARCH SUGGESTIONS .......................... 47
7.4 QUALITY CRITERIA ................................................................................. 48
8 REFERENCE LIST ............................................................................ 50
APPENDICES
APPENDIX 1: FINANCIAL LITERACY TEST BY KLAPPER ET AL., (2016, p.6)…….55
APPENDIX 2: INTERVIEW GUIDE……………………………………………………..56

LIST OF FIGURES
FIGURE 1: INTERVIEW GUIDE……………………………...……...………....25
FIGURE 2: BRAUN AND CLARKS’ 6 STEP THEMATIC ANALYSIS………...........28

LIST OF TABLES
TABLE 1: FINANCIAL LITERACY TEST QUESTIONS…………………………..24
TABLE 2: PARTICIPANT INFORMATION……………………………………….27
TABLE 3: FINANCIAL LITERACY TEST RESULTS……………………….……..29
1 Introduction
The aim of the introductory chapter is to introduce the background of our research
problem and inform the reader about the relevance of the topic. This chapter will
provide an overview of the problem, introduce the research question and purpose as
well as go through previous research on the subject.

Technological advancements have allowed individuals the opportunity for increased

financial market accessibility. This opportunity was exploited by a Reddit community called
WallStreetBets that choreographed a plan to take advantage of strong short positions by
Wall Street. One specific company that the WallStreetBets community targeted was
GameStop due to the financial state of the company. The COVID-19 pandemic caused
retailers to struggle mightily and GameStop was not an exception (Bhattarai and Telford,
2021). As of 2019, they had 5,509 store locations worldwide and a very weak online
presence, which caused them to lose money rapidly once the lockdowns transpired
(GameStop, 2020). GameStop planned on closing 450 stores worldwide during 2020
(Helmore, 2021). However, e-commerce ‘experts’ and executives believed GameStop
should transition to an all online marketplace that would compete and function like Amazon
(Helmore, 2021). Due to these circumstances, amateur investors, a part of the
WallStreetBets community, used platforms like Robinhood as well as other financial
services to purchase the stock while it was at a relatively cheap price (Helmore, 2021).
Alternatively, Wall Street thought the idea of competing with Amazon was an ambitious
bet and believed GameStop would fail (Helmore, 2021). Therefore, Wall Street took a risky
short position on GameStop that ended up with them losing $2.79 billion (Helmore, 2021).
Shorting a stock is risky because it is ‘borrowing’ the stock of the company and then selling
the stock of the company with the intention of buying it back at a cheaper price (O’Brien,
2021). This extreme event was described as a David-versus-Goliath moment, when the
small amateur investors developed a plan that they believed would make Wall Street pay.
Due to the massive media publicity of the event, individuals from outside the Reddit group
purchased shares of GameStop. Even though this was an extreme situation, there are other
instances regarding the effect that social media has had on the stock market and more
specifically the individual investors active on social media. The fact that a social media
community was able to have the reach and ability to influence countless individuals spurred
the idea of this study.

1.1 Problem Background

The ability for individuals to have access to financial markets and manage their financial
future independently has created a demand for recommendations from amateurs and in some
cases unqualified individuals on social media platforms. As a result of increased
accessibility, people who do not have the knowledge or financial literacy to make sensible
financial decisions have the capabilities of making poor decisions (Skagerlund et al, 2018,
p. 19). Additionally, individuals that are financially literate have the risk of unintentionally
following the advice of a ‘social media expert’ due to the ease and persuasiveness of
uncontrolled social media platforms. A problem arises when unqualified, inexperienced, or
amateur investors are creating financial recommendations for people that do not have the
necessary knowledge or wherewithal to make sound decisions. This problem has the
potential to continue growing as more publicity and awareness for social media
communities, like WallStreetBets, increase and their audience’s grow.

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Not only has the amount of social media platforms drastically increased since the beginning
of the 2000’s but also the amount of monthly active users have substantially increased. To
put the increase of activity into perspective, the beginning of social media arguably started
in 2004, when MySpace amassed 1 million active users per month (Ortiz-Ospina, 2019).
Comparatively, Instagram amassed 1 billion active users per month during 2019, which is
just one of the many social media platforms that are currently operating (Koack et al., 2019,
p. 625). This only shows a small magnitude of how much social media activity has increased
over roughly the past 17 years. One of the many reasons why such a large number of people
have joined social media is to gather information or self-educate themselves about various
topics (Whiting & Williams, 2013, p. 363). Self-improvement is just one example of why
people join social media; however, the knowledge being posted and shared on most social
media platforms are not regulated by experts or fact checked, which opens up the possibility
of untrustworthy information spreading. This becomes a problem when content creators or
‘community’ leaders have the capabilities of reaching massive audiences and gaining
enormous followings while spreading, in a financial context, ill-advised information. The
group, WallStreetBets, is an example of a social media ‘community’ where individuals
discuss, recommend, and speculate about stocks and trading options (Wolff-Mann, 2021).
The information discussed in the group does not need to be fact checked or have sound
financial concepts to verify opinions. People immersed within or spectating the online
community may be reading and gathering information from amateur or unqualified
investors that are not educated about financial markets. Furthermore, professional financial
advisors are held accountable by their clients and employers to make educated
recommendations. Professional financial advisors must make informed decisions and must
disclose conflicts of interest when making decisions or advising for clients (Tretina, 20211).
Conversely, content creators on social media have no accountability when making
recommendations, do not need to make informed decisions, and do not need to disclose
conflicts of interest. As a result, people relying on social media can make decisions that are
not based on sophisticated or well informed processes and may not be making investments
with their best interest in mind.

The potential escalating problem is the culmination of people having the ability to make
their own financial decisions while having access to the opinions of more social media
‘communities’ and content creators. The current alignment of these two trends can lead to
people making poor financial decisions, such as purchasing shares of GameStop at the peak
or decline of the stock price, due to the erroneous influence of social media platforms on
both financially literate and illiterate individuals. This will be vital to know because as
technological advancements continue changing the financial landscape, by enabling more
independence, individuals need to be aware of the consequences of following imprudent
suggestions. Establishing how specific social media platforms influence an investor's
decisions, based on their own financial literacy, will illuminate the extent of influence social
media has on investors.

1.2 Theoretical Background and Research Gap

A study conducted by Chiang & Zheng (2010, p. 1920) showed that herding behavior is
present in advanced stock markets and Asian markets. Herding is used to describe the
correlation in trades, which is a result of interactions between investors. Investors with this
behavior tend to copy and follow the activities of financial gurus and successful investors
instead of using their own knowledge as that could make them suffer a greater loss. This
behavior tends to be triggered by crises in different countries, which leads to a contagious
effect that spreads to neighboring countries (Chiang & Zheng, 2010, p. 1911). Furthermore,
Sahi et al. (2013, p. 102) researched the psychological biases in financial investment

2
behavior, the findings showed that individuals have various beliefs and preferences that bias
their financial investment decision behavior. Physiological motives like greed, security,
fears and safety are guided by our social nature, all of which impact investment decisions
(Sahi et al., 2013, p. 102). The study also shows that emotions and affective influences have
an effect on investment behavior as many people tend to relate to money in an emotional
way, which makes them biased in their decision making, and that they are inclined to use
heuristics when they cannot effectively analyze the information available on the market
(Sahi et al., 2013, p.101-102). A study by Bellofatto et al. (2018, p. 178) showed that people
with higher financial literacy and more experience of financial markets tend to make smarter
investments. Additionally, they also display both higher net and gross returns as well as
higher excess Sharpe Ratios (Bellofatto et al., 2018, p. 178). Investors who see themselves
as very literate usually exhibit a higher trading activity on stocks and other financial
instruments (Bellofatto et al., 2018, p. 178).

Pedersen (2021, p. 33) presented findings that some investors participating in financial
markets are rational while others gather their knowledge through social networks and echo-
chamber environments. Pedersen (2021) researched the case of GameStop and the effects
social networks can have on the financial markets. Through the social media platform
Reddit, a few interested retail investors who believed GameStop was undervalued started to
buy the shares and push the stock price up, which led to a chain reaction where more people
started buying the stock Pedersen (2021, p. 29-33). A link to the Reddit community for the
GameStop traders was then tweeted by the business mogul Elon Musk, with a following of
around 55 million people (Twitter, 2021), which led to an increase in the stock price as
many others followed his advice (Pedersen, 2021, p. 4-5). Siikanen et al. (2018, p. 212)
researched the relationship between Facebook data and investors’ decision making based
on the data from investors’ transactions on Nokia. This research showed that the more
sophisticated investors, like financial institutions, are not associated with Facebook data.
While the less sophisticated investors, like households, are associated with Facebook data
(Siikanen et al., 2018, p. 212). This could be explained by the fact that households might
not have the same access to professional financial data and news as financial institutions,
which leads to households utilizing biased information found on Facebook (Siikanen et al.,
2018, p. 212).

The previous research (Chiang & Zheng, 2010; Sahi et al., 2013; Bellofatto et al., 2018;
Pedersen, 2021 & Siikanen et al., 2018) focuses a lot on how different aspects affect an
individual's investment behavior and how certain platforms and events have influenced the
market and investment decisions. The previously mentioned studies are all quantitative
studies except the research conducted by Sahi et al. (2013), which is qualitative. Therefore,
we are conducting a qualitative study to further test the theories supported by the
quantitative studies and expand upon the pre-existing theories. A qualitative approach will
allow greater insights and explanations into the subject because of the complexity and depth
that the responses to the interview questions from the respondents. Moreover, a qualitative
study will garner a deeper understanding into the impact that social media has on personal
finance and investment decisions as well as the magnitude of effect that social media can
have on an individual's investment decision. Utilizing a qualitative approach to determine
if there is a difference between how people with differing financial literacies gather their
knowledge before investing and if they are affected or inspired by trends and news on
different social media platforms will add to the previously established theories.

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1.3 Research Question
Due to recent instances regarding social media’s influence on the stock market and
investments, identifying if a relationship exists between the use of social media and the
financial literacy of individuals is pertinent. Questions, such as: how much influence does
social media have on investors? and, how does social media affect an individual’s
investment decisions? were the initial thoughts that developed during the research leading
up to this study. Eventually, this led to a refined research question that illuminates and
encapsulates the purpose of this study.

Does social media influence the investment decisions of individuals differently depending
on their financial literacy?

1.4 Purpose and Main Focus of Research

The purpose of this thesis is to investigate the effects that social media has on the decision
making process of individuals based on their financial literacy. The objective will be to
determine if there is a difference between the influence and role social media plays in the
investment decisions of individuals based on their financial literacy. The financial literacy
of the respondents will be placed in either a higher or lower financial literacy group. The
respondents will be ranked amongst one another to form the higher or lower financial
literacy group depending on their score compared to the other participants, further
information will be given in Section 4.3. Due to the development of social media, people
have the ability to communicate and gain knowledge about investment ideas and
opportunities easily. Simultaneously, the development of financial technologies are
allowing individuals the chance to control their economic state by granting them the means
to select investments. The combination of having the ability to control their financial future
and receive recommendations from social media gives people the assumption that they can
make investment decisions independently. However, past events have indicated that social
media can heavily influence investments and short-cut the decision making process without
the necessary financial knowledge to support decisions. Therefore, the main focus will be
examining the impact that social media content has on the investment decisions depending
on the financial literacy of the participants.

1.5 Delimitations
Since we have a limited time frame and resources to complete this thesis, our research is
limited to consist solely of Swedish born and raised individuals because including
individuals from different countries would be too complicated and time-consuming.
Additionally, all eight participants of our study are people studying various university
programs, which means every individual a part of this study has a higher educational
background. Having participants that studied at a university was the priority because
previous studies (Klapper & Lusardi, 2020, p. 592; Lusardi & Mitchell, 2007, p. 219;
Skagerlund et al., 2018, p. 22) concluded that there is a connection between educational
background and financial literacy. Lastly, the age range of the participants was 20 to 25
years old, meaning that no comparisons were done between different age groups. Selecting
the age range between 20 and 25 years old was because of the social media and
technological usage associated with this age range. As a result of this delimitations, all the
respondents were 20 to 25 years old, university educated, and from Sweden.

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1.6 Disposition
The following chapter will present the scientific methodology of our thesis, where the
philosophical foundation is presented. The chapter describes the chosen inductive research
approach, the qualitative method of gathering data and the exploratory design of our thesis,
as well as our standpoints in the ontological, epistemological and axiological philosophies.
Chapter three presents our theoretical framework, where we review previous literature on
the subjects of financial literacy, risk tolerance, social media and its effect on decision
making. This chapter presents the theories from previous research that was utilized to
develop the research question and topic for this thesis. The fourth chapter includes the
practical methodology where our data collection and sample are described in detail. The
chapter describes how we calculate the participants' financial literacy through an online
survey, our choice of conducting semi-structured interviews and its process, and how the
data will be analysed in the chapters thereafter. The following chapter, chapter five, presents
the empirical results of the thesis, where the results from the financial literacy test are
presented and the information gathered through interviews with each participant. This
stating of our findings is followed by a discussion in chapter six where we analyze our
results and make connections and comparisons with the theory presented in chapter three.
The aim of this chapter is to answer our research question and discuss the implications of
the results. Lastly, chapter seven is the final chapter of this thesis, which will present a
conclusion that summarizes the work in this study. This chapter also includes
recommendations for future research, theoretical and practical implications and the quality
criteria of this thesis.

5
2 Scientific Methodology
This chapter describes the chosen methods and philosophies used in this thesis. The
chapter starts by describing the philosophical foundation & method followed by the
relevant research philosophy applied in this thesis. Then we introduce the applied
research approach, method and design. The chapter ends with the ethical
considerations of this thesis.

2.1 Philosophical Foundation & Method

When conducting scientific research, declaring the specific research paradigm philosophy
will dictate the methodology that the research will be based upon. This philosophy is viewed
as a spectrum that consists of two paradigms, positivism and interpretivism (Collis &
Hussey, 2014, p. 43-44). Interpretivism explains reality as a subjective perspective that is
constructed based on individuals' experiences, which aligns with our qualitative study
because we will be conducting interviews that will explore the individual experiences of our
respondents (Collis & Hussey, 2014, p. 45). More specifically, we want to gain a further
understanding of how social media influences each individual's decision making process.
Basing our research on positivism would not allow us to learn about each individual’s
personal insights, explanations, and preferences because positivism is defined as an
independent reality that can be verified scientifically using statistical analysis, which is
utilized for quantitative studies (Collis & Hussey, 2014, p. 44). Therefore, the interpretivist
paradigm will be utilized in our study to gather a more comprehensive view of results by
examining each individual’s personal thoughts, experiences, and explanations.

When applying specific research paradigms, avoiding contradiction is essential to

conducting a thorough study with valid results (Collis & Hussey, 2014, p. 50). Conducting
an interpretivist study requires the use of small samples to gain in-depth knowledge of the
social phenomena used by the respondents (Collis & Hussey, 2014, p. 51). Due to our desire
for rich insight into each individual's experiences, a sample size of eight respondents will
be utilized to grant us the opportunity to attain personal information. Conversely, positivist
studies portray a generalization of a population and do not allow the same in-depth
understanding of respondents, which does not align with our study and would inhibit our
ability to understand our interviewees (Collis & Hussey, 2014, p. 51). Therefore, our study
will obtain subjective and valuable qualitative data that will not generalize a population
using statistical analysis.

Presenting high validity findings is an imperative aspect of interpretivist studies because

our questions need to be directly related to the main focus of our study to get responses that
align with the purpose (Collis & Hussey, 2014, p. 214). Neglecting this aspect can lead to
the respondents losing focus and failing to maintain interest in the quality of their responses.
If this were the case, our findings would not clearly answer or relate to our purpose, which
lowers the validity and relevance of our study. To avoid low validity findings, we will
clearly state the purpose of our study to our interviewees as well as formulate our interview
questions with the main focus of the study in mind and connect the questions to theories
stated in the theoretical framework.

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2.2 Research Philosophy

2.2.1 Ontology
In philosophy, ontology is the science of what is, of the nature and structures of processes,
objects, events, relations, and properties in every area of reality (Smith et al., 2003, p.155).
Asking about the meaning of a concept equals asking about the nature of reality. Within
qualitative research, debates and discussions about concepts relate to the meaning of
concepts, while in the quantitative approach it concentrates on issues of data and
measurement (Goertz & Mahoney, 2012, p.207). Ontology seeks to provide a
comprehensive and definitive arrangement of entities in all spheres of being (Smith et al.,
2003, p.155).

Ontology is made up of two sides; objective and subjective (Saunders et al., 2009, p.111).
When articulating our ontology, we have to decide whether we see the world and view
reality as objective or subjective (O’Gorman & MacIntosh, 2015, p.55). Objectivism can be
described as viewing reality as made up of solid objects, which exist even when we are not
directly observing or experiencing them, which can be tested and measured (O’Gorman &
MacIntosh, 2015, p.56). The objective perspective can thus be described as despite our
comprehension of it, reality exists independently, and it is possible to explain and establish
facts and principles through replicable methods (O’Gorman & MacIntosh, 2015, p.57).
Subjectivism can be defined as reality built on the interactions and perceptions of living
subjects (O’Gorman & MacIntosh, 2015, p.56). The subjective perspective assumes that
what we perceive is what shapes reality and that every individual experiences their time and
place in the world differently. Facts are subject to the flexible experiences, attitudes,
interpretations and behaviors of the observer and the observed (O’Gorman & MacIntosh,
2015, 57).

This will be a qualitative study where we will research how social media impacts the
individual investment decision based on their financial literacy. In this study, the individual
experiences that social media has on our respondent’s investment decisions will be
explored. Therefore, the subjective approach is to be considered since it allows us to draw
conclusions from each respondent's personal experience.

2.2.2 Epistemology
Epistemology revolves around what is true and what is not true (Klakegg, 2016). Questions
about epistemology involve the notions of knowledge, probability, justification, evidence,
reasons for believing, what one should believe or similar notions (Fumerton, 2006, p.1). It
is the theory of knowledge (Klakegg, 2016). Through examining the relationship between
the research subject and the researcher, we analyze which knowledge is valid to use in
research (Collins & Hussey, 2014, p.47).

There are two positions for epistemology, positivism and interpretivism (Saunders et al.,
2009, p. 113). Positivists can be described as hypothesizing and explaining principles
(O’Gorman & MacIntosh, 2015, p.59). The paradigm focuses on facts and is usually
connected with the natural sciences (O’Gorman & MacIntosh, 2015, 60). The research is
driven by objective facts and data where the reality is distinctly observable (Saunders et al.,
2009, p.115). Positivism uses highly specific and precise data, which makes it popular in
business (O’Gorman & MacIntosh, 2015, 61). Research conducted with this approach aims
to test and study existing data and to further cultivate this data and theory (Saunders et al.,
2009, p.115). The concept of interpretivist can be viewed as interpreting and understanding

7
relationships (O’Gorman & MacIntosh, 2015, 59). While the positivist paradigm focuses on
facts, the interpretivist paradigm instead focuses on meaning and understanding what is
happening (O’Gorman & MacIntosh, 2015, p.60). This approach is often thought of as the
generic paradigm of the social sciences (O’Gorman & MacIntosh, 2015, p.64). The
interpretivist belief is that individuals behave differently as social actors in different
circumstances. Each individual interprets situations differently and behaves according to
their interpretation of the world (Saunders et al., 2009, p.113). This approach takes into
account the various realities, which are unavoidably revealed by the viewpoints of different
individuals. Interpretivism focuses on understanding what is happening in a certain situation
rather than measuring it (O’Gorman & MacIntosh, 2015, 65).

Objective ontology is usually aligned with the positivist approach, while subjective
ontology usually aligns with the interpretivist approach (O’Gorman & MacIntosh, 2015,
p.59). In this research we will conduct a qualitative study and the data will be collected
through interviews. The interpretivism approach usually uses smaller samples and attempts
to create new theories (Collis & Hussey, 2014, p.50). Therefore, since we will interview a
selected group of investors with varying financial literacies and perspectives, the
interpretivist philosophy is better suited for our research to analyze and draw conclusions.

2.2.3 Axiology

The philosophical judgement of values greatly impacts the findings and methods of a study
and consists of two main viewpoints of how the role of a researcher’s values impact a study
(Collis & Hussey, 2014, p. 48). Within this philosophical framework, there are two beliefs
that have opposing views on the role that the researcher has on both respondents and results
specifically. The interpretivist viewpoint is that the research, in general, is subjective and
researchers need to acknowledge their impact and involvement in their studies (Collis &
Hussey, 2014, p. 48). Due to the interview process and in-depth information we strive to
obtain, we are fully aware of the potential impact that we may have on our respondents as
well as the subjectivity that could be displayed based on the results from our interviewees.
Conversely, the positivist viewpoint argues that researchers must be objective about their
results and remain independent from their data (Collis & Hussey, 2014, p. 48). This way of
thinking does not align with our study because it does not enable us the opportunity to
elaborate about our results and communicate extensively with our respondents to get the
necessary depth of knowledge. Ultimately, the interpretivist viewpoint will allow us to
subjectively respond to our findings and interact with your interviewees.

2.3 Research Approach

Applying the correct argumentation for the research approach establishes the scientific
reasoning and validates the processes associated with formulating the fundamental
framework of a study. There are two research approaches, deductive and inductive
reasoning, that have opposing viewpoints of how theories and hypotheses are constructed
(Spens & Kovács, 2005, p. 374) . The deductive approach to research derives logical
conclusions or hypotheses based on previously established theories (Spens & Kovács, 2005,
p. 376). Then the hypotheses or theories are empirically tested to determine the significance
of the findings and draw conclusions. As a result, deductive reasoning is considered a theory
testing process that establishes a generalization with the intention of testing whether specific
examples apply to the theory (Hyde, 2020, cited in Spens & Kovács, 2005, p. 376). Using
this rationale to determine the influence that social media has on individuals’ investing
decisions would not allow us to gain the necessary insights to the personal explanations and
justifications of our respondents. Therefore, basing our study on the deductive research

8
approach would generate findings that lack the depth that would accurately reflect the
influence each interviewee has experienced.

Ultimately, inductive reasoning is the more suitable research approach for our study due to
the aspects this approach utilizes. Instead of deriving specific hypotheses from theories to
determine the significance of results or empirical findings, the inductive approach uses
empirical findings as the starting point to develop theories further (Spens & Kovács, 2005,
p. 377). Since the aim of our study is to gain further knowledge of how social media
influences the decision making process of investments, using inductive reasoning
establishes the fundamentals that will enable our study to achieve this goal and further
develop findings from previous research.

In addition to inductive and deductive reasoning, there are basic and applied research
approaches that help characterize the design and framework of a study. The studies that
utilize the basic research approach have the purpose of broadening the existing scientific
findings and knowledge (Collis & Hussey, 2014, p. 6). This approach does not represent the
intention of our study because the findings we will produce will not broaden existing
scientific findings. Instead, the intention of our findings will be to enhance the
understanding of social media's influence over investment decisions. This aligns perfectly
with the applied research approach because the applied process refers to studies that are
concentrated on identifying specific findings and knowledge (Collis & Hussey, 2014, p. 6).
Studies that use applied research approaches have the intention of enhancing the
understanding of existing problems in order to achieve improved policies, practices, or
knowledge (Collis & Hussy, 2014, p. 6). As a result, our study will utilize the applied
research approach as a part of the framework to develop an increased understanding of how
social media influences individuals’ investment decisions.

2.4 Research Method

Leedy and Ormrod (2001, cited in Williams, 2007, p. 65) defined research as the activity of
gathering, analyzing, and interpreting data to be able to understand a phenomenon.
According to Adams et al., (2007, p. 26) there are two main ways to conduct research:
qualitative and quantitative.

Quantitative data can be reduced to numbers, which allows it to be analyzed using statistics.
However, some information cannot be reduced to numbers, like people’s feelings, emotions,
beliefs and ideas, which we classify as qualitative data. This kind of information can only
be described using words and not manipulated mathematically, and it records qualities
rather than quantities (Walliman, 2011, p.71). Therefore, the methods used to collect data
in a qualitative study are based on interactions with the respondents (Creswell, 2014, p. 4),
which can be collected through observations or interviews (Adams et al., 2007, p. 26).
Qualitative research is different from quantitative research in the sense that the researcher
tries to understand the different viewpoints of the respondents, while quantitative research
remains objective and creates a distance between the respondent and researcher (Bryman,
1984, p. 78). The qualitative paradigm views knowledge through an interpretivist approach,
meaning it focuses on understanding the opinions of individuals and how they can perceive
a situation differently (Creswell, 2014, p. 8). On the other hand, the quantitative approach
is viewed more through a positivist approach, meaning the approach has a more objective
point of view, which assumes claims that concern an individual’s behavior cannot truly be
positive (Creswell, 2014, p.7). Qualitative data is usually expressed in words rather than
numbers and can never be accurately measured (Walliman, 2011, p. 72). This data has a

9
descriptive character, which can lead to great insights into human society. It depends on
plotting the interrelationships between the development of variables and concepts and the
definition and meaning of words (Walliman, 2011, p.73).

In this study, a qualitative approach will be used in order to gain a deeper knowledge about
the effect social media can have on investing. Even-though this method limits us to a smaller
sample size than the quantitative approach, where we could construct a survey that would
potentially gain a larger response rate, we believe that interviews allow for a deeper
discussion that are not restricted to simple yes and no answers. Therefore, the qualitative
approach was best suited for this thesis, which will help gain a broader knowledge into the
phenomenon, which can help us understand the influences behind individuals investment
decisions. The alternative method of a larger scaled survey that could have been used was
not chosen due to the fact that most previous research (Chiang & Zheng, 2010; Bellofatto
et al., 2018; Pedersen, 2021 & Siikanen et al., 2018) conducted has had a quantitative
approach, which furthers the reasoning behind our choice of conducting a qualitative study
as it would enrich our research and contribute with a different viewpoint.

2.5 Research Design

Research design is the general plan and structure for the research (Saunders et al., 2009,
p.136). There are three main ways to manage research, depending on its nature it can be
exploratory, descriptive, or explanatory (Saunders et al., 2009, p. 139).

Research performed with an exploratory approach aims to investigate new ideas,

perspectives or clarifications of vague concepts to further develop and explore what is
already established from previous research (Saunders et al., 2009, p. 139-140). This research
seeks to find explanations as to why a phenomenon exists and to explore prospective
relationships between occurrences or variables (Adams et al., 2007, p.20). This type of
research is usually completed through interviews, searching for literature or focus groups
(Saunders et al., 2009, p. 140). Descriptive research is focused on describing a phenomenon
through preconceived behavior (Edgar & Manz, 2017, p. 133). It should describe the
different characteristics of a phenomenon in order to analyze certain behavior and make
specific predictions (Sreejesh et al., 2014, p. 33). According to Adams et al. (2007, p. 20)
descriptive studies want to describe a phenomenon but do not really aim to understand the
behavior behind the way it is. Descriptive studies usually generate informative qualitative
results but not mathematically quantifiable results and they have a subjective nature (Edgar
& Manz, 2017, p. 133). Methods used when conducting a descriptive study are case studies,
surveys, and case reports (Edgar & Manz, 2017, p. 132). Explanatory research describes a
phenomenon but also aims to understand the behavior behind the way it is (Adams et al.,
2007, p. 20). The emphasis is on creating casual relationships between variables and
describing the underlying reasons behind this phenomenon (Saunders et al., 2009, p. 140).

Based on these three methods, we can conclude that the nature of our research is exploratory
since we want to investigate a new perspective on how social media can affect decision
making in a subject that has not yet been researched, and we aim to explore the why or why
not of how social media has affected on personal investments. The reason we did not choose
an explanatory approach is because the authors want to explore if social media has any
effect on individuals’ investment decisions based on their financial literacy, and not solely
focusing on finding a casual relationship.

10
2.6 Ethical Consideration
All research must be carried out honestly and researchers must act with integrity to produce
a study that is credible and unbiased. Interactions with participants always lead to ethical
dilemmas because the way they are treated and interact can result in complications at any
stage of the study (Walliman, 2011, p. 42). In order to avoid ethical implications with our
participants, we consulted with outside advisors to discuss and develop ethical guidelines
to implement in every interaction with our participants.

Before conducting interviews, we established certain criteria that were followed to assure
the potential participants were fully aware of the subject and purpose of the research as well
as clarified that their participation was completely voluntary. To avoid any added pressure
to commit to being interviewed for our study, we gave ample opportunity for the participants
to change their minds so that no participant would regret taking part in our study. As an
additional measure, we told every participant that there was an option to terminate their
responses and participation at any point in time with no repercussions. Finally, every
interviewee was made fully aware that we, the authors, were both students doing this activity
as an academic exercise.

Furthermore, ethical guidelines were developed to treat participants with ethical

consideration when communicating and presenting their personal responses and information
(Walliman, 2011, p. 47). We have taken the necessary precautions to minimize the risk that
could be harmful to the participants’ dignity, privacy or reputation. One way of doing this
is by explaining the exact process and thoughts that go into any conclusion that will be
formulated to avert accusations of false information or misrepresentation. However, there
are possible ethical dangers when simplifying responses while discussing data from our
interviews, which can occur when misinterpreting vocal inflections, subtleties of humour,
or asides (Walliman, 2011, p. 48). Full transparency of the information gathered will be key
for our study to avoid misconceptions because we are fully aware of the consequences of
misinterpreting information. Additionally, any and every piece of personal information will
remain confidential and stored in a safe location only accessible to the authors.

The ethical guidelines established for this study are in accordance with Umeå University
standards and will result in honesty and integrity regarding the use/creation of our own
words, thoughts, and ideas as well as the interactions with the interview participants. Due
to the applied research approach being more susceptible to ethical investigations,
maintaining scientific objectivity as much as possible will reinforce the validity of the
findings from the research (Walliman, 2011, p. 46). Ultimately, the ethical implementations
of this study have been thoroughly thought through to create a study with little to no
scrutiny.

11
3 Theoretical Framework
This chapter introduces the relevant theory used in this thesis and the previous
findings within the topic we are investigating. The aim of this chapter is to give the
reader a broader knowledge of the different concepts and theories: financial literacy,
risk tolerance, social media, and social media's effect on decision making.

3.1 Financial Literacy

Conventional microeconomics suggests that a well-informed and fully rational individual
will make the optimal savings and consumption decision (Lusardi & Mitchell, 2014, p. 2).
However, this theory assumes that well-informed and fully rational individuals are able to
understand complex financial calculations and financial markets, which is another way of
stating that individuals are financially literate. Previous research has conclusions that
question the validity of this theory due to the decision making process that financially
literate individuals follow (Modigliani & Bromberg, 1954; Friedman, 1957; cited in Lusardi
& Mitchell, 2014, p. 2). Additionally, this theory does not account for outside influences
that can alter and manipulate the decision making process. As a result, countless studies
have been conducted to determine the importance and significance of financial literacy
(Klapper et al., 2016; Lusardi & Mitchell, 2020; Lusardi & Mitchell, 2007; Skagerlund et
al., 2018).

By virtue of escalating financial complexity, the need to increase the general population’s
basic understanding of financial concepts is growing (Lusardi and Mitchell, 2007). The
future financial stability of a person is becoming increasingly more and more in their own
hands due to technological advancements and access to information. Based on current
trends, Skagerlund et al. (2018, p. 18) believe that the financial future of an individual will
be completely dependent upon their own actions and decisions in the future. Therefore,
having the ability and knowledge to make intelligent financial choices, with the use of
financial concepts, will be a pivotal life skill to possess for the sake of an individual and
society the individual is embedded in. Without a basic understanding of financial concepts,
Klapper & Lusardi (2020, p. 589) believe that people would not have the necessary
knowledge to make sound financial decisions regarding savings, borrowing, investing, and
more because financial literacy affects matters on multiple levels. This belief opposes
conventional microeconomic’s theory and will later be supported by findings from other
studies. Furthermore, past research supports the notion that financially literate people have
the necessary abilities to obtain financial stability (Lusardi & Mitchell, 2011, p. 5).

Multiple studies have been conducted and concluded that the greater understanding a person
has about financial concepts, the more likely a person will be to participate in financial
markets (Almenberg & Dreber 2015; Christelis, Jappelli, & Padula, 2010; Van Rooij,
Lusardi, & Alessie, 2011; Yoong, 2011, cited in Klapper & Lusardi, 2020, p. 590). A few
examples of financial market participation include the stock, bond, real estate, and capital
markets. In addition to more financial market participation, studies have proven that
financially literate people are also more likely to choose mutual funds and diversify their
savings (Hastings & Mitchell, 2011; Hastings, Mitchell, & Chyn, 2011; Hastings & Tejeda-
Ashton, 2008, cited in Klapper & Lusardi, 2020, p. 590). The actions and decisions made
by financially literate people clearly impact their planning behavior positively, which was
established in Lusardi and Mitchell (2007). This means that people do a better job of saving
for retirement, handling unexpected market shocks, and reducing their risk exposure
(Lusardi & Mitchell, 2014, p. 7; Klapper & Lusardi, 2020, p. 590).

12
3.1.1 Numeracy

Social theory argues that literacy is something that people do while autonomous models
claim that people either are or are not literate (Craig & Guzman, 2018, p. 5). Numeracy is a
concept that is intangible in these opposing views because numeracy is considered a specific
form of literacy, which leads to the question of whether people are numeric or numeracy is
what people do. Numeracy is the ability to understand basic numerical concepts,
probabilities, ratios, and quantitative estimations (Cokely et al., 2012, p. 25). Previous
research has concluded that people with lower levels of numeracy have an understanding
of “‘real number line, time, measurement, and estimations’ whereas higher levels focus on
an ‘understanding of ratio concepts, notably fractions, proportions, percentages, and
probabilities’” (Reyna et al., 2009, cited in Ghazal et al., 2014, p. 16). One point of
argumentation from researchers in the past has been that a substantial portion of the
construct of financial literacy is attributed to numeracy (Skagerlund et al., 2018, p.
18). Moreover, numeracy may even “provide the computational engine behind financial
decision making based on conceptual knowledge of finance” (Skagerlund et al., 2018, p.
19). Multiple studies support this notion because there is correlation and predictive behavior
between the level of numeracy and financial behavior/decision making (Ghazal et al., 2014,
p. 22). Specifically, statistical numeracy, which is the understanding of statistical and
probabilistic problem solving, is considered one of the best predictors for decision making
and superior judgment of not only numerical tasks but also non-numerical tasks (Cokely et
al. 2012; Cokely & Kelley, 2009; Kutner et al., 2006; Lipkus & Peters, 2009; Peters, 2012;
Peters & Levin, 2008; Peters et al., 2006; Reyna et al., 2009, cited in Ghazal et al., 2014, p.
15).

3.1.2 Financial and Mathematical Anxiety

In addition to other characteristics and factors that determine financial literacy, there are
also theories based on emotional aspects, financial and mathematical anxiety, that are
hypothesized to independently interfere with an individual’s ability to obtain financial
literacy (Skagerlund et al., 2018, p. 19). Financial anxiety can be defined as a negative
feeling that is associated with inadequacy regarding financial institutions, systems, and
concepts (Skagerlund et al., 2018, p. 19). Due to the subjectivity of emotional aspects, using
a questionnaire that states responses, such as ‘I am uncertain about the words and phrases
that are being discussed by financial experts,’ are the only way of measuring the extent of
the effect on an individual (Skagerlund et al., 2018, p. 19). One definition of mathematical
anxiety is by Richardson & Suinn (1972, p. 551), which states that the definition is “feelings
of tensions and anxiety that interfere with the manipulation of numbers and the solving of
mathematical problems in a wide variety of ordinary life and academic situations.”
However, mathematical anxiety is not directly related to the inability to solve mathematical
problems or classified as a personality trait (Ramirez et al., 2013, cited in Skagerlund et al.,
2018, p. 19). The simplest way of describing it is as a negative attitude or outlook toward
numbers. A study by Skagerlund et al. (2018, p. 19) concluded that mathematical anxiety
was a stronger option at predicting financial literacy than financial anxiety. Based on
Skagerlund et al. (2018, p. 19) conclusion, the belief was that mathematical anxiety hampers
the ability of a person to acquire the necessary mathematical competencies to attain financial
literacy. There was also an expectation that mathematical anxiety impacts the direct
influence on economic decisions because it manipulates numbers. As a result of multiple
studies (Lusardi, 2012; Grohmann et al. (2015 cited in Skagerlund et al., 2018., p. 19),
mathematical anxiety is considered the stronger predictive emotional factor for financial
literacy than financial anxiety.

13
3.1.3 Gender

In 2016, a survey was conducted by the S&P Global FinLit Survey to test and measure the
financial literacy of individuals of varying genders, educational levels, nationalities, and
other factors. One conclusion drawn from the survey was that there was an overall
difference in financial literacy between men and women (Klapper et al, 2016, p. 12). On a
worldwide basis, 35% of men are considered financially literate while 30% of women are
considered financially literate (Klapper et al., 2016, p. 12). Despite women having a less
likely chance of correctly answering a financial literacy question, Lusardi & Mitchell
(2014), along with other studies, observed that women are much more likely to signify they
do not know the answer to a question. This could be explained by the fact that women are
more susceptible to the deterrents of financial and mathematical anxiety (Skagerlund et al.,
2018, p. 19). This literacy gap is found not only in emerging economies but also advanced
economies (Klapper et al., 2016, p. 12). Even when taking into consideration the variations
of age, education, income, and country, women still measured weaker than men in financial
skills (Klapper et al., 2016, p. 12). Various theories have been tested to identify the cause
or reason for the difference in financial literacy between men and women. However,
explanations why there is a gap between genders at a young age is unknown and studies
conducted have inconclusive results.

3.1.4 Educational Background

The amount of research about the correlation between financial literacy and years of
education has mounted up and has continuously presented the same conclusions. There is a
relationship between the education background and financial literacy (Lusardi & Mitchell,
2007, p. 219; Skagerlund et al., 2018, p. 22). Specifically, Lusardi & Mitchell (2007, p. 219)
conducted a study where they divided their respondents by their educational degree, who
all varied on levels of financial literacy. Their results concluded that the individuals with
the least amount of education, no high school diploma, were substantially worse compared
to the other educational degrees (Lusardi & Mitchell, 2007, p. 219). The reason why
educational degrees have a strong relationship with financial literacy is because financial
literacy clearly increases with educational attainment (Klapper & Lusardi, 2020, p. 592).

3.1.5 Measuring Financial Literacy

Lucardi and Mitchell (2007) believe the predominant way to measure the financial literacy
of an individual is by administering a simple test that requires participants to answer
questions about various financial concepts correctly. Although there are different ways of
structuring the questions, the consensus among researchers is that there are four main
concepts that need to be addressed through the test that will determine the degree of
financial literacy. Depending on the length and difficulty of questions asked, the degree of
financial literacy is dependent upon the number of correctly answered questions, which is
decided individually for every test. One test creator claims that there are three aspects of
financial literacy: “(1) Numeracy/knowledge of interest compounding, (2) knowledge of
inflation, and (3) knowledge of risk diversification” (Klapper and Annamaria, 2020, p. 592).
However, the S&P Global FinLit Survey specifies that there is a difference between
numeracy and interest compounding (Klapper et al., 2016, p. 6). Klapper and Lusardi (2020,
p. 592) identified that the four fundamental financial concepts based on the S&P Global
FinLit Survey are risk diversification, inflation, numeracy interest, and interest
compounding.

14
Despite the backing of Standard and Poor’s, the test conducted by Klapper et al. (2016, p.
6) does have downsides that need to be addressed. Among the financial literacy questions
present in the test conducted by Klapper et al. (2016, p. 6), there are mainly objective
questions that have clear correct and incorrect answers. However, the questions regarding
risk diversification can be subjective depending on the wording of the question and/or the
individual risk tolerance of an individual. Furthermore, a study conducted by Xia et al.
(2014) utilized both subjective and objective financial literacy tests as a way of measuring
the confidence level of individuals, which is another way of determining the financial
capabilities of people. Appendix 1 illustrates the test administered by Klapper et al. (2016,
p. 6) which consisted of only five questions, one per topic except for compound interest that
consisted of two questions, which makes it difficult to encapsulate the vast concepts related
to each topic. As a result, Klapper et al. (2016) as well as other studies (Williams, 2011, p.
99; Skagerlund, 2018, p. 20; Markowitz, 1952, p. 89) will be utilized when constructing the
financial literacy test for this study.

3.2 Risk tolerance

Risk tolerance has an important role in portfolio decisions. An investor's capability to deal
with risks can be related to characteristics like time horizon, age, liquidity needs, income,
portfolio size, attitude towards price fluctuations and their overall investment knowledge
(Sung & Hanna, 1996, p. 11). Jackson, Hourany and Vidmar (1972, cited in Hallahan et al.,
2003, p. 58) describes four dimensions to risk tolerance: financial, social, physical and
ethical. These four dimensions seem to be consistent within decision-making.

Risk tolerance can be defined as “the maximum amount of uncertainty someone is willing
to accept when making a financial decision” (Grable et al., 2008, p. 7). Those with higher
income and high self-esteem are likely to be more risk tolerant. As the income level
increases, so will the average risk tolerance level (Grable et al., 2008, p. 7). However, it has
been shown that wealth does not equal risk tolerance. Even though wealthy people with
high income can afford the loss from a risky investment more easily, they also tend to be
more conservative with their money and people with a lower wealth may on the contrary
instead view risky investments as a lottery and thereby be more willing to take a higher risk
(Hallahan et al., 2003, p. 58).

Previous studies done by Halek & Eisenhauer (2001, p. 22) and Ardehali et al. (2005, p.
103) showed that men and younger people tend to be more risk tolerant. It is believed that
risk tolerance decreases with age (Pålsson, 1996, p. 785), which can be explained by the
fact that older people will be more affected by a loss from a risky investment, while a young
person has more expected years to recover from a loss (Hallahan et al., 2003, p. 58). It is
also shown that females have a lower fondness for risk than males (Hallahan et al., 2003, p.
58). Sung & Hanna (1996, p. 11) writes that married couples and households consisting of
a single male are more risk tolerant than households that consist of a single female.
Additionally, Halek & Eisenhauer (2001, p. 22) found that people who are unemployed are
more willing to take a larger risk by gambling their current income for a chance to double
it.

15
The risk an individual can afford to take depends on their total financial situation, which
includes the kinds and sources of their income exclusive of investment income (Malkiel
1996, p. 401). The ratio of financial assets to total wealth is important when determining
the optimal volatility level for a portfolio (Sung & Hanna, 1996, p. 11). This ratio tends to
be related to years until retirement (Sung & Hanna, 1996, p. 11). Chen and Hanna (1995,
cited in Sung and Hanna, 1996, p. 11) came to the conclusion that it would be reasonable
for households to only have stocks intended for long term goals, like retirement, in their
portfolios and for young workers, accepting a higher volatility when investing for retirement
could lead to a greater yield at retirement.

Hanna et al. (2001, p. 53) has identified four methods of measuring risk tolerance:
Investment Choice Measures, Mixed Measures, Assessing Actual Behavior Based on
Economic Models and Measures using Hypothetical Scenarios Constructed on Economic
Models. Investment Choice Measures is a method that involves asking a question regarding
risk tolerance about how much risk a respondent is prepared to take for investments (Hanna
et al., 2001, p. 53). A good example of this is the Federal Reserve Board’s Surveys of
Consumer Finances (SCF), researchers who have used SCF’s data found that the majority
of investors were not prepared to take above average risk for the return to be above average,
only a minority of respondents were willing to do this (Hanna et al., 2001, p. 53). The Mixed
Measures method is based on asking the respondents a mix of investment and subjective
questions (Hanna et al., 2001, p. 54). Mittra (1995, p. 397-399) used this method and created
two different questionnaires for the respondent, where both were still related to the choices
the investor made regarding portfolio management. However, Hube (1998, cited in Hanna
et al, 2001, p. 54) distinguished that a downside of using this method is that some
respondents might have the tendency to be dishonest in their responses to avoid looking
“weak.” Assessing Actual Behavior Based on Economic Models is based on the notion that
risk tolerance is the opposite of the economic concept of risk aversion, when risk tolerance
increases, risk aversion decreases, and vice versa (Hanna et al., 2001, p. 54). Pålsson (1996,
p. 773) describes that risk aversion originates from household preferences and measures the
unwillingness to suffer risk. However, Hanna et al. (2001, p. 55) writes that it is likely that
household behavior and economic models do not match, due to the fact that the majority of
households have low quantities of liquid assets and consequently can not hold high levels
of risky investments. Lastly, the method of Measures Using Hypothetical Scenarios
Constructed on Economic Models was presented by Barsky et al. (1997, cited in Hanna et
al., 2001, p. 55) where they constructed an experimental measure based on a set of
hypothetical questions asked to adults aged 51 to 61. This measure linked the survey
questions with the concept of risk aversion through asking the respondents what percentage
of risk they are willing to take in order to have a chance of doubling their income and relative
risk aversion (Hanna et al., 2001, p. 55).

3.3 Social Media

Social media can be described as a collection of internet-based applications where online
information is created, circulated, and used by consumers to communicate and educate one
another (Whiting & Williams, 2013, p.363). It works as a communication mechanism that
allows users to connect with people all over the world (Whiting & Williams, 2013, p.363).
The term “social media” was first used in 1994, and since then both the number of users and
variety of different platforms has increased significantly to the point that social media has
become one of the internet’s most important applications (Aichner et.al, 2020, p. 215).
Social media is a collective term used to describe a range of different platforms like, social
networks, blogs, photo and video sharing, forums, and social gaming, to name a few
examples (Aichner et.al, 2020, p. 215).

16
Today social media is not only used by the single individual, but also by companies, and we
have over the last few years seen a major increase in businesses that are active on different
platforms. This does not only function as a marketing instrument but also a direct line of
communication with the customers (Aichner et.al, 2020, p. 215).

The major reasons why people use social media are (1) for social interaction, where they
can communicate and interact with friends, family and other people, (2) to gather
information about various topics and self-educate, (3) to pass time, (4) for entertainment
where they can simply have a pleasurable fun and enjoyable time, (5) to relax and relieve
day-to-day stress, (6) as a communication utility that helps provide information to share
with others, and lastly (7) as a convenience function that helps provide convenience or
usefulness to individuals (Whiting & Williams, 2013, p. 364).

The major reasons that people use social media today is firstly for social interaction, where
they can communicate and interact with friends and family (Whiting & Williams, 2013, p.
364). According to Aichner et al. (2020, p. 216), social media also helps to build and
strengthen relationships through the sharing of important life events in the form of updated
status reports and sharing of photos or videos. Another reason why people use Social Media
is for their love life. It has shown to help when starting a relationship as it can be easy to
connect with people through these platforms (Aichner et.al, 2020, p. 216). It also helps
people avoid unnecessary discomforts as face-to-face rejection is considered more painful
than online rejection (Aichner et.al, 2020, p. 216). Moreover, people also use social media
to interact with companies and brands, it is estimated today that almost 100% of larger
businesses use social media to gather information, inform their customers, receive feedback,
provide service and consultancy, and promote their product/service (Aichner et.al, 2020, p.
216). Social media is a great place for doing business and it allows two-way communication
between the customer and the company (Aichner et.al, 2020, p. 216). Many individuals use
Social Media for job seeking and professional networking, it is simply a way to connect
employers with prospective job seekers (Aichner et.al, 2020, p. 216). A good example of
this kind of platform is LinkedIn, where recruiters can post job advertisements to lure job
seekers (Aichner et.al, 2020, p. 216).

A study done by Perrin (2015, p. 4) showed that the most likely social media users are those
aged 18-29, where a total of 90 percent of the respondents claim to be active on social media.
Comparatively, the least active age group on social media are those 65 years old and older,
with only 35 percent claiming to be active (Perrin, 2015, p. 4). Auxier & Anderson (2021,
p. 7) conducted a survey about the usage of social media on individuals over the age of 18
year old. The report showed that some of the most popular social media platforms to use
among young adults aged 18 to 29 are Instagram, with 71 percent, TikTok, with 48 percent,
Twitter, with 42 percent, and Reddit, with 36 percent (Auxier & Anderson, 2021, p. 7).

3.3.1 Instagram

Instagram is a photo and video-sharing social media platform with more than 1 billion
monthly active users in 2019, which makes it the third largest social media platform in the
world (Koack, et al., 2019, p. 625). This platform allows people to share their personal life,
activities, habits, interests and lifestyles with other people in the form of pictures and videos.
Instagram is built on having followers who receive the updates made by the Instagrammer
and can view a collection of all their photos/videos posted on their timelines, which they
then can interact with through liking or commenting (Al-Kandari et al., 2016, p. 54). The
platform allows users to gain followers, facilitate social interaction and communicate with
different brands and entities (Venus Jin et al., 2019, p. 567).

17
Instagram is based on visual aesthetics, which makes it ideal for users looking to promote
fashion and beauty products or to advocate certain lifestyles that allures their followers.
Instagram has a large number of people with a great amount of followers who are regarded
as ‘tastemakers’ in different niches, otherwise known as influencers (Venus Jin et al., 2019,
p. 567-569). A total of 25 million brands can be found on the platform, where they can share
information about their products or services to their followers (Koack, et al., 2019, p. 625).

3.2.2 TikTok

TikTok is a creative platform that allows users to create and share short videos (Herrman,
2019). It was the second most downloaded app on Android and the fifth most downloaded
application on Apple’s App Store in 2019 (Anderson, 2020, p. 7). TikTok mainly consists
of quirky videos that, for the most part, are not professionally or aesthetically produced,
which are primarily targeted to youth through dancing, singing, and comical videos (Wang,
2020, p. 2). It is an algorithm-driven app where the users can get to see videos according to
which categories interest them (Anderson, 2020, p. 8). For example, comedy, travel, food
& beauty will appear on an individual's “For You” page (Anderson, 2020, p. 8). Omar &
Dequan (2020, p. 130) found that people that partake in TikTok to interact with other people
are able to express themselves and to escape from reality. They also found that the users
who create TikTok videos are motivated by their need to fulfill their self-expression and
archiving needs (Omar & Dequan, 2020, p. 130).

3.2.3 Twitter

Twitter is a platform used for microblogging that has a user base of more than 192 million
people in the fourth quarter of 2020 (Twitter, 2021). The platform is a directed social
network, where users can choose which users to follow. Then the user can tweet, which
means that they post updates consisting of short messages with a maximum of 280
characters (Romero et al., 2011, p. 20). Much like Instagram, these tweets are then shown
to whomever follows the user and shown on their profile. Twitter posts usually consist of
pictures, personal information, news, or links to articles (Romero et al., 2011, p. 20). Other
users can then choose to retweet this post, which means it will be shared on their profile,
which can widen the reach of the tweet and thereby influence more people (Romero et al.,
2011, p. 20).

3.2.4 Reddit

Reddit is a community driven platform that was used for submitting, commenting, and
rating text posts and links (Singer et al., 2014, p. 517). Reddit amassed over 52 million
active users every day and over 100 thousand communities as of January 2020 (Reddit,
2020). Reddit calls themselves “the front page of the internet” (Anderson, 2015, p. 8) and
claims that their site acts as a gateway to the top content available on the internet (Singer et
al., 2014, p. 517.) Users on Reddit can post either a self post, which can contain text, photos,
videos, or a link. These posts can also include “Ask Me Anything” where users can ask the
one who posted anything they want. In 2021, President Obama did an “Ask Me Anything”
on Reddit, which increased the platform's attention on mainstream media (Anderson, 2015,
p. 8). After a user has made a post, other Reddit users can ‘up’ and ‘down’ vote the posted
item, which ranks the latest submissions in an ever-changing top list of the hottest
submissions (Singer et al., 2014, p. 517).

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3.4 Social media’s effect on decision making
Social media platforms like Twitter, Facebook, YouTube and LinkedIn as well as platforms
for online games like World of Warcraft or the virtual world HABBO have an impact on
decision making both on a personal and managerial level (Power & Phillips-Wren 2011, p.
257). Jargalsaikhan & Korotina (2016, p. 39) found that there is an increased chance that
consumers purchase a product after seeing a post about it made by an influencer on social
media. Consumers are also very selective when processing and gathering information before
a purchase is made (Lee, 2013, p. 69). Power & Phillips-Wren (2011, p. 258) found that
consumers will seek information on social media before making a decision and that
information is considered more reliable. Furthermore, companies can use this to make
predictions and to influence the consumers' product decision making in the future (Power
& Phillips-Wren, 2011, p. 258).

High levels of trust lie behind information gathered on social media and there is a higher
chance that people referred from a social media platform will purchase a product (Power &
Phillips-Wren, 2011, p. 258). Yang (2015, p. 56) found that advertising messages provided
by commercial sources on Facebook had a greater influence on consumers' decision-making
behavior than if the message was received by a close friend. In alignment with Yang’s
findings, Forbes (2013, p. 110) also concluded that consumers prefer to take
recommendations from people they do not know, which indicates that companies can
influence the consumer's future decision-making.

Research conducted by Siikanen et al., (2018, p. 208) examines the extent to which
individuals' investment decisions in the stock market are driven by Facebook activity and
posts, where the relationship between trades in the Nokia stock and social media data is
compared. The research showed that Facebook activity affects different investors' trading
decisions differently. The findings showed that less sophisticated investors, like non-profit
organizations and households, decisions to increase or decrease shareholdings are clearly
connected to Facebook data (Siikanen et al., 2018, p. 212). Meanwhile more sophisticated
investors, like financial institutions, are trading in Nokia independently from Facebook
activities and are not associated with Facebook data (Siikanen et al., 2018, p. 211). Siikanen
et al. (2018, p. 212) concluded that this could be explained by the fact that non-profit
organizations and households possibly do not have an equivalent access to professional
financial data and news as financial institutions have, which could lead to the less
sophisticated investors to utilize biased information found on Facebook.

Power & Phillips-Wren identified that social media could have an impact on decision
making since its direct communication helps companies understand trends and consumer
opinions easier (Power & Phillips-Wren, 2011, p. 257). Bulmer and Dimauro (2011, cited
in Power & Philips-Wren, 2011, p. 257) constructed a study with 105 respondents from 20
different countries, where they found that being active on social media affects companies’
decision making at an executive level. By participating in online communities, 80 percent
of the respondents felt like they were able to quicken the decision-making process and
information development.

19
Social Media does not only impact the decision making of purchases but also the decision-
making process of a range of decisions. Galan et al., (2015) writes about how prospective
postgraduate business students use Social Media as a tool for their educational decision-
making process. The most common reason why students use social media is when they are
making the decision about which university to study at (Galan et al., 2015, p. 308). Galan
et al. (2015, p. 308) stated the students would read reviews from former students, gather
information about student life, and evaluate their alternatives.

Both formal and informal groups that are active on social media have a tendency to act as
“mobs” where they make decisions together without being rational or reflecting over the
situation (Power & Phillips-Wren, 2011, p. 257). An example of a similar situation where
groups behave like ‘mobs’ was the GameStop incident. The members of the Reddit
community, WallStreetBets, thought that the stock was undervalued, which led to a
synchronized act where members started to invest in the company to drive the stock price
up, these actions created a chain-like effect where an increasing amount of people started
investing in the stock (Pedersen, 2021, p. 29).

20
4 Practical Methodology
In this chapter our chosen methods of data collection are reported. Background
information to all participants are provided and how we conducted our study is
properly described. This chapter aims to give the reader a detailed insight into how
we collected our data through a financial literacy test and the interview process.

4.1 Data Collection and Sample

There are two main forms of data: primary and secondary data. Data that has been
experienced, observed, or documented near the event is the closest one can get to gathering
the truth, which is why it is called primary data (Walliman, 2011, p. 69). We absorb primary
data frequently because sight, sound, taste, and tactile things are stimulating our senses.
However, we also gather primary data through different instruments that we cannot
accurately judge, only through our senses like thermometers, barometers, and clocks etc.
(Walliman, 2011, p. 70). Primary data comes from an original and direct source (Collis &
Hussey, 2014, p. 59) and is the most immediate documentation of a situation. It can provide
information about any aspect of our life and surroundings. Without it, it would be hard to
understand anything but the simplest phenomenon (Walliman, 2011, p. 70). The main
methods used when collecting primary data are asking questions, conducting interviews,
and doing experiments (Walliman, 2011, p. 92).

On the other hand, secondary data has already been documented and interpreted. This type
of data reaches us through magazines, news, internet, advertisements etc. (Walliman, 2011,
p. 70-71). An important part of gathering secondary data is making an assessment on the
quality, which quality tends to vary based on the source. Articles and papers written by
experts, in refereed or serious journals, will most likely have a higher quality than magazines
where the information can be either useful and reliable or completely offhand (Walliman,
2011, p. 71). Information on the internet, television, and radio can vary a lot in quality
(Walliman, 2011, p. 71). Secondary data is data that has already been collected in order to
fulfil some other purpose (Collis & Hussey, 2014, p. 59). The perks of using secondary data
are that it allows for a faster sampling process, the disadvantage however is at the cost of
accuracy since the data is originally collected for another research question (Saunders et al.,
2009, p. 270). With this in mind, primary data suits better for our research as we want
accurate results and precise/direct information that matches our research question, even
though it is more time consuming. We will be conducting interviews since we believe that
will help us get more in-depth knowledge about our research question and why or why not
people use social media as a tool when making investment decisions.

When conducting research, we want to have as large a sample of students that invest as
possible, but as it is impossible to have all students in the study, we tried to find a selective
group that is representative of the rest (Walliman, 2011, p. 93). This will help us draw
conclusions which can be relatable to an entire group. The bigger the sample used the more
accurate the results for the population will be (Saunders et al., 2009, p. 217-218). Sampling
is usually conducted either through probability sampling or non-probability sampling.
Probability sampling is centered around using random methods when selecting the sample,
this approach aims towards every respondent having an equal chance of being selected for
the research (Walliman, 2011, p. 96). This method is associated with research that uses
surveys when collecting data (Saunders et al., 2016, p. 276). The sampling techniques used
for the probability method include simple random sampling, cluster sampling, and stratified
sampling (Walliman, 2011, p. 96). On the contrary, non-probability is based on selecting

21
respondents with non-random techniques. This is normally used for research where it is
difficult to access an entire population (Walliman, 2011, p. 96). This approach allows the
researcher to select a sample centered around their subjective judgment (Saunders et al.,
2016, p. 295). Techniques that normally are used for this approach includes purposive
sampling, quota sampling, haphazard sampling. and volunteer sampling (Saunders et al.,
2016, p. 298). In this research, we will be using the purposive sampling technique. This
technique allows the researcher to use their judgment in the selection of respondents that
will lead to the research question being answered. This method is commonly used when the
sample is very small. Therefore, the research carefully needs to assess the decision of
including and excluding certain samples when using this technique (Saunders et al., 2016,
p. 301).

When choosing the sample for our study, we reached out to a selected number of people
who studied different university programs to take a small survey which tested their financial
literacy. The test is constructed with eight questions with two for each category: Risk
Diversification, Inflation, Numeracy, and Compound Interest, which is described in more
detail in Section 4.3. This test will help us evaluate how social media affects investment
decisions, where we can draw conclusions based on their different levels of literacy. Eight
respondents were chosen for an interview that showed different levels of financial literacy,
who we proceeded to group into higher or lower financial literacy. The respondents selected
for this research had to fulfill a few criteria. They had to be Swedish students enrolled at
university, be actively investing and have different levels of financial literacy. There were
no requirements on age or gender. We tried to get an equal amount of male and female
respondents; however, in the end we got a male dominated sample where they made up 62.5
percent of the respondents. Specific information for each participant can be found in Table
2 in Section 4.4.

4.2 Literature Search Process

In order to conduct a thorough and methodical study that establishes a comprehensive
framework and understanding of financial concepts and social media platforms, in-depth
research on specific topics and theories was essential during the beginning of the
development process for this study. Utilizing online sources, such as Google Scholar and
Umeå University Library, allowed access to a multitude of high quality academic articles
and books from a wide variety of authors located all around the world. The decision to refine
the initial literature search to only articles and textbooks was determined because these two
sources produce high quality content that is either peer reviewed or written by well informed
authors. Our literature search consisted of three phases all with different objectives to
enhance our general understanding of previous research, concepts, and theories. Phase one
aimed at finding similar literature to our topic that carried out studies regarding social
media’s effect on investors investment decisions. The use of keywords, like social media,
investment decisions, and effects on decision making, helped identify studies and theories
suitable for our topic. This preliminary search established the basis of our study and the core
purpose for the results. Phase two consisted of searches specifically intending to highlight
key financial concepts and theories based on these concepts that could be utilized for the
research. Primarily, the phrases searched for during this phase were financial literacy,
numeracy, financial and mathematical anxiety, investment decisions and risk tolerance. This
portion of our literature search highlighted the importance of certain concepts and the
insignificance of others. The final phase of our literature search aimed at figuring out the
individual uses/purposes of prominent social media platforms as well as the user growth of
each platform has produced over the past few years. The significance of this section of our

22
literature search was predominantly for our interviews to fully understand which platforms
could be used by our participants. Ultimately, not every article that was discovered and read
was used as a source in our paper or pertained to the particular subject matter of the study.

4.3 Financial Literacy Test

As a preliminary test to determine the financial literacy of our respondents, each person was
asked to answer an online financial literacy test that was constructed and inspired by
previous research (Klapper et al., 2016 p. 6; Walliman, 2011, p. 99) which is illustrated in
Appendix 1. The respondents were told to not use a calculator, search for answers using the
internet or ask for help because this test is designed to determine the financial literacy of a
person. Additionally, the respondents were made aware that if they were unaware or unsure
of an answer that they should select the “Don’t know.” option as their answer. This allows
people that either are unsure of an answer or have financial or mathematical anxiety to select
an answer without guessing it correctly.

Due to the lack of variation of using only four questions, our financial literacy test has eight
questions, two questions per financial concept, to create the opportunity for greater variation
of responses. Every question was constructed as a multiple choice style question that had
one correct answer that would signal high financial literacy. The number of answers per
question varied from three to five choices. Utilizing reworded questions that were inspired
from previous studies assured relevant questions and findings from the survey. Question 1
and 2 was inspired by Markowitz's (1952, p.89) findings that a portfolio with stocks in
different industries are more diversified than portfolios with stocks in one industry. The
reasoning behind this is that it is less likely for businesses in different industries to do poorly
than businesses in the same industry. Therefore, investors should diversify their portfolios
across industries since businesses in different industries have lower covariances than
businesses within one industry (Markowitz, 1952, p.89). Question number 6 was influenced
by a question stated in Hens et at. (2016, p. 117), which is designed to show whether the
respondents were relatively aware of the interest rate at the time of taking the test. The
remaining five questions were modified or created independently based on the questions
developed by Klapper et al. (2016, p. 6). Table 1 reports the questions with the correct
answers of the financial literacy test.

23
Table 1. Financial Literacy Test Questions.
RISK DIVERSIFICATION NUMERACY (INTEREST)

1. Which of the following investments is the safest option? 5. Suppose you borrow 1000 SEK, which of the following is the lowest amount to pay back?

• One business
• One industry • 1000 SEK plus 3 % (CORRECT)
• Multiple businesses in one industry • 1050 SEK
• Multiple businesses in multiple industries (CORRECT) • Don’t Know
• Don’t know

2. Having a diverse portfolio… 6. Which is the better option based on the current interest rate?

• Is only necessary for a risk averse person.

• Can eliminate the risk of an individual business, but cannot eliminate the risk of the entire • 3 400 SEK today
market (CORRECT) • 3 800 SEK next month (CORRECT)
• Can eliminate the risk of the entire market, but cannot eliminate the risk of an individual • Don’t know.
business
• Increases the volatility of a portfolio
• Don’t know

INFLATION COMPOUND INTEREST

3. If the price to purchase things triples over the next five years and your income also triples, will 7. Suppose you have saved money in the bank for 2 years and the bank adds 20% every year to your
you… account. Will the bank add the same amount both years or more the second year than the first year?

• Less money
• Be able to purchase less in five years than today • The same amount
• Be able to purchase the same in five years than today (CORRECT) • More money (CORRECT)
• Be able to purchase more in five years than today • Don’t know
• Don’t know

8. Suppose you put 1 000 SEK into a savings account and the bank gives you an annual compounding
4. If the inflation rate increases by 5% over one year and an individual stock’s price increase by 3% interest rate of 10%. How much money will you have in your account after 5 years if you do not
during the same time, the value of that stock… withdraw any money?

• Less than 1 500 SEK

• Increased
• Exactly 1 500 SEK
• Remains the same
• More than 1 500 SEK (CORRECT)
• Decreased (CORRECT)
• Don’t Know
• Don’t know

24
4.4 Interview
Due to the framework and formatting of our study, having the ability to freely change our
interview guide for each individual depending on their responses was a priority when
choosing the optimal interview question guide. A semi-structured interview format contains
both structured and unstructured processes that allow open and standardized questions to be
asked when applicable or desired (Walliman, 2011, p. 99). Utilizing this format allowed
each interview to follow the same general approach so that the responses would be
comparable even though different questions would be asked. Using a structured interview
outline would not have allowed further elaboration from the respondents or relevant
information regarding their personal usage of social media. Therefore, a semi-structured
format enables us the opportunity to ask unique questions to the respondents depending on
their responses. More specifically, the interviewees would be asked different questions
depending on their responses to our five standardized questions. Figure 1 displays the five
standardized questions used in every interview. In Appendix 2, more questions are presented
that work as a guide throughout the interviews where different questions were asked based
on each participant's answer. These questions work as an addition to our five standardized
questions, which helped us gather more information from the participants and allowed for
a more elaborate discussion.

• Do you believe you possess the necessary financial

1 knowledge to make investment decisions independently?

• Where do you find your information or inspiration before you

2 decide to invest?

• Are you more influenced by financial analysis or

3 product/service description and potential?

• Do you or have you used any Social Media for your

4 investment decisions?

• Do you view yourself more as a risk tolerant person or as a

5 risk averse person?

Figure 1. Interview Guide.

Question 1, do you believe you possess the necessary financial knowledge to make
investment decisions independently, was constructed for us to be able to compare if the
respondents' view of their knowledge matched the results from the financial literacy test
based on Klapper et al. (2016, p. 6). The purpose of this question was to see if the individual
self-confidence of our respondents aligned with their financial literacy test. Additionally,
this question could illuminate a link between the respondents' reliance on social media and
their confidence level in themselves. Since this question does not specifically apply to either
respondents that use or do not use social media, Questions 1 was considered one of the
standardized questions that was applicable to every participant. Lastly, the responses
generated from this question would not be replicable by a quantitative style approach

25
because the explanations from each respondent would be unique and necessary to
understand their thinking.

The formulation of Question 2, where do you find your information or inspiration before
you decide to invest, used the research by Whiting & Williams (2013, p. 364) and Power &
Phillips-Wren (2011, p. 258) as the main references because these studies found that one of
the major uses of social media was gathering information. Therefore, asking the respondents
what platforms or media are used to gather information would determine whether an
individual utilizes social media or not as a primary source. Question 2 would allow the
respondents to elaborate about which sources they used as well as allow for a wide range of
sources. Due to the vast amount of possible responses, asking this question as a multiple
choice style question would not allow for the more in-depth understanding of how or why
the respondents utilized their sources. As a result of the direct relevance to the research
question and applicability to every participant, Question 2 was one of the standardized
questions.

Question 3, are you more influenced by financial analysis or product/service description

and potential, was inspired by the research conducted on financial literacy (Cokely et al.,
2012; Skagerlund et al., 2018; Ghazal et al., 2014) and social media (Whiting & Williams,
2013; Aichner et.al, 2020; Romero et al., 2011; Venus Jin et al., 2019; Herrman, 2019). The
purpose of this question was to determine if the participants that are more influenced by the
financial analysis also are those who possess a higher financial literacy because they might
be more confident evaluating the financials. Conversely, identifying if there would be a
connection between the participants that are more influenced by the product/service
description of a company and use social media when making investment decisions since the
product/service can be viewed as more abstract would be the alternative connection. Due to
the connections that could be established from the responses to Question 3, this question
was asked to every participant and would not have the same comprehensive understanding
in a quantitative approach.

The development for Question 4, do you or have you used social media for your investment
decisions, was based upon the findings in a study conducted by Power & Phillips-Wren
(2011, p. 257), which found that consumers use social media when making decisions.
Therefore, Question 4 directly asks the respondents about the past and/or present use of
social media as a way of determining the usage of social media. Despite the general yes or
no responses to this question, the elaboration on the context and situation from the
respondents is the primary objective of this question, which could not be fully understood
utilizing multiple choice style questions. As a result, Question 4 was considered a
standardized question that would be asked to every participant because each individual
response would give further understanding.

Lastly, Question 5, do you view yourself more as a risk tolerant person or as a risk averse
person (Hallahan et al., 2003; Halek and Eisenhauer, 2001; Ardehali et al., 2005; Sung &
Hanna, 1996) on risk tolerance. The purpose of this question is to identify a potential pattern
between the investors risk taking and social media usage. This question would allow us to
gain further insight into the thinking of our respondents and develop an understanding of
each individual's investment decisions. Since Question 5 requires an explanation for the
thinking of the respondents, this question is ideally utilized in a qualitative study that allows
for elaboration by the participants. Due to this and the applicability of the question, Question
5 was considered a standardized question.

26
In total, there were eight university students with varying educational backgrounds,
investing histories, and genders that were interviewed. Despite every participant taking our
financial literacy test before the interviews, their scores did not affect the questions or
treatment of any of the participants. As a result, every interview was conducted in the same
manner with no objectivity or bias. The date and time for the interview was set based on the
participants schedules and availability, due to our participants being students, most were
very flexible with the scheduling, which led to us being able to conduct all interviews,
except the one with Participant #7, during a two day span. Table 2 illustrates the participants
background information, the date and the length of each interview.

Table 2. Participant Information

Name Gender University Education Date Time

Participant #1 Male Business 28/04-21 34 min

Participant #2 Male Civil Engineering 28/04/21 28 min

Participant #3 Female Environmental Studies 28/04/21 17 min

Participant #4 Male Business 28/04/21 18 min

Participant #5 Male Business 29/04/21 16 min

Participant #6 Female Veterinarian 29/04/21 20 min

Participant #7 Male Business 03/05/21 17 min

Participant #8 Female Physical Engineering 29/04/21 14 min

Every interview started off the same with respondents answering the five standardized
questions in varying orders depending on the direction of the conversation. Depending on
the influence that social media had or did not have determined whether more specific and
open questions regarding social media’s influence on decision making were asked. If social
media was not influencing or being utilized by a respondent, then the conversation and
questions were focused on their decision making process. Since the purpose of this study is
to determine how social media influences the decision making process of individuals,
identifying and exploring the decision making process of people that do not use social media
will give perspective to the entire situation. The potential of having two completely separate
influences made it paramount to have an interview structure that would enable changes
depending on the respondent. As a result, the interviews will be comparable and both
standardized and open questions will be used.

27
4.5 Data Analysis
Our research has an inductive approach which aims to understand the context of the research
and to find the meaning behind information through collecting and analyzing data (Saunders
et al., 2016, p. 570). For this research a thematic approach will be used, which is one of the
most common ways to analyze the collected data. This method can be used both for
deductive and inductive research as it does not follow any specific philosophical positions
(Saunders et al., 2016, p. 579). Braun & Clark (2006, p. 79) describes thematic analysis as
a technique used for identifying, analyzing and reporting themes within the collected data,
furthermore Saunders et al., (2016, p. 579) states that the purpose of thematic analysis is to
explore themes or patterns in the collected data through coding.

Figure 2 illustrates six steps identified by Braun & Clarke (2006, p. 87) for a thematic
analysis. Nowell et al., (2017, p. 11) states that when these six steps are thoroughly followed
a trustworthiness of the research can be reached, since this method allows the researcher to
constantly evaluate and reevaluate the given data since it is analyzed in meticulous detail.

Familiarizing Defining and

Generating Searching for Reviewing Producing
ourselfs with naming
intial codes themes themes the report
the data themes

Figure 2. Braun and Clarks’ 6 step thematic analysis.

The first step familiarizing yourself with your data involves immersing ourselves into the
data through repeated reading to the extent that we become familiar with the content’s depth
and breadth (Braun & Clarke, 2006, p. 87). This step includes transcribing the verbal data
that we’ve collected through our interviews. The interviews conducted in this research were
recorded with the alumni’s approval, this made it easier for us to transcribe the interviews
as we could play back the videos several times in order to transcribe exactly what was said
and not miss anything important. The next step in our analysis is to generate initial codes,
meaning we want to highlight certain features we found interesting throughout the interview
to get as good a base as possible for identifying our themes (Braun & Clarke, 2006, p. 88).
When this is completed, we want to start searching for themes. This step is where we try to
find patterns and similarities through collating the coded data into potential themes (Braun
& Clarke, 2006, p. 89). The fourth step is when we start reviewing the themes which means
we need to go over the themes we found in the previous step, check and see which themes
that have enough data to be supported, if they need to be broken down to more themes, if
they should be incorporated with another theme or if they even classify as a theme at all
(Braun & Clarke, 2006, p. 91). The last two steps defining and naming themes and
producing the report involves going deeper into refining and defining the themes that will
be presented in our analysis and then when they are fully worked out the final analysis and
write-up of the report can begin (Braun & Clarke, 2006, p. 92-93).

28
5 Empirical Results
The objective of the results chapter is to clearly state the responses from the
participants of the study in an easily comparable context and structure. This chapter
is divided into four sections: Financial Literacy Test, Investment Decisions, Source of
Financial Information or Recommendations, and Social Media Usage and Influence.

5.1 Financial Literacy Test

The financial literacy test results were utilized to clearly differentiate the respondents into
two unbiased groups. Based on the percentage of correct answers, the respondents were
separated into ‘higher financial literacy’ and ‘lower financial literacy’ categories, which was
broken down further based on the time it took to complete the survey. Table 3 illustrates the
financial literacy test result for each participant.

Table 3. Financial Literacy Test Results

Name Score (%) Time

Participant #1 100.0 % 1 min

Participant #2 87.5 % 5 min

Participant #3 87.5 % 7 min

Participant #4 87.5 % 10 min

Participant #5 75.0 % 5 min

Participant #6 62.5 % 12 min

Participant #7 62.5 % 47 min

Participant #8 37.5 % 4 min

Within the ‘higher financial literacy’ grouping, Participant #1 answered 100 percent of the
questions correctly, which no other respondent was able to do, and finished with the fastest
time. Therefore, this individual was viewed as the person with the highest financial literacy
of the group. Then the remaining people a part of the ‘higher financial literacy’ grouping
were Participants #2, #3, and #4, all of which answered 87.5% of the questions correctly
(#7 out of #8). In order to rank these participants, the time it took for each participant to
complete the test was used to determine the order. All four of these individuals are
considered to have higher financial literacy than the other four individuals. This does not
mean that the remaining four people are not financially literate because they have not
answered a necessary number of questions correctly. However, for the purpose of this study,
Participants #5, #6, #7, and #8 are categorized as having ‘lower financial literacy’ compared
to the other respondents. The rankings of all the participants within the lower financial

29
literacy group were ranked based on their scores. Participant #5 scored the fifth most which
equated to him ranking highest among the lower financial literacy group. When ranking
Participants #6 and #7, the time it took to complete the test was the defining aspect to
separate the two participants. Both of these participants answered 62.5% of the questions
correctly, but since Participant #6 completed the test roughly 35 minutes before Participant
#7, Participant #6 was ranked higher. Lastly, Participant #8 ranked eighth answering 37.5%
of the questions correctly.

5.2 Interview Results

5.2.1 Investment Decisions
Higher Financial Literacy

There are multiple aspects that go into making an investment decision and determining
whether an individual believes they have the capabilities of independently making
investment decisions. Participant #1 believed that he possessed the necessary tools to make
financial decisions on his own. However, he said that there are too many potential
companies to invest in to do analysis on all of the companies independently, which was why
he used other resources that offered recommendations. Ultimately, Participant #1 stated that
he did his own analysis to see if his findings and conclusions matched the recommendations
of his sources. Then Participant #2 said that he did not know a lot about “sharp quotas,
specific key figures, or specific statistics about companies.” However, he believed that he
has “a decent understanding of economic related stuff,” which made him believe that he has
pretty good financial knowledge when making investment decisions independently.
Participant #3 did not believe she possessed the necessary financial knowledge to make
investment decisions independently and said that she prefered making decisions based on
recommendations. The last member of the higher financial literacy group, Participant #4,
believed “[he] possesses the necessary knowledge to make investment decisions
independently.”

When asking the interviewees about their investment outlook, the common response among
the higher financial literacy group was all of the participants having some sort of long term
outlook. Participant #1 described his investment outlook as a long term perspective when
investing with only two short term goals and the rest long term oriented. He characterized
his short term goals as anything shorter than five years and his long term goals as anything
over five years. Participant #2 viewed himself as a long term investor with long term goals.
He proceeded to talk about how his goal was to create long term wealth, which was why no
short term goals had been established. Similar to Participant #1, Participant #3 said that her
portfolio was constructed to have both long term oriented goals, which contributed to the
majority of the portfolio and was made up of funds, and short term goals, which was
composed of less money and more risky stocks. Finally, Participant #4 said he viewed
himself as a long term oriented investor that tried to seek short term profits but reluctantly
switched back to a long term plan.

When asked to rate their portfolio construction on a scale from risky to not risky, the
respondents gave explanations why they gave the response they did. Participant #1
described his risk exposure as two separate ratings because of the construction of his
portfolio. He rated his “serious” portfolio as risk neutral but said that he wanted to increase
the risk exposure because of his long term outlook for this portion of his portfolio.
Conversely, he described his “trendy or hot stocks” portion of his portfolio as
“extraordinarily risky.” He said, “it is 11 out of 10 on a risk scale.” Participant #2

30
characterized himself as a risk averse or not risky investor that has made contradictory
investments, which did not align with his general risk tolerance. Despite a few risky
investments, he still considered himself not risky and desired to continue being not risky.
Participant #3 viewed herself as a risk averse investor because of her goal to “create and
sustain long term wealth and investments.” Additionally, she later talked about her portfolio
construction and how funds are a big component of her long term outlook. Lastly,
Participant #4 described himself as an investor that has some risky and some safe
investments but overall he characterized himself as a risky investor.

The financial statistics and product or service potential of a company are two different ways
of evaluating a company, one mathematical and the other theoretical. When asked which
factor was more influential when investing, the responses varied. Participant #1 said he was
more influenced by the idea of the business and what they are trying to do than the financial
performance of a company. He personally believed that “numbers are much harder to read
and accurately predict,” while it was easier to predict which sector and industry would be
successful in the future. Alternatively, Participant #2 generally looked at the profitability of
companies and then would think about the future of the market sector. He later clarified that
the financials of a company are more influential factors when making and evaluating a
decision. When deciding whether the financial performance or business ideas was more
important, Participant #3 stated that she cares about the financial and track record of a
company, if the investment was considered long term. Conversely, short term investments
depended more on the product or business idea of a company. Lastly, Participant #4 stated
that he usually relied on the financial aspects and performance of a company rather than the
theoretical aspects of a company, like product innovation. However, he did later state that
he would ask himself whether he or other people would use the product or service of a
company but the financial performance was still more important and influential to him.

All four of the respondents that scored higher scores on the financial literacy test said that
they at least generally try to conduct their own research before making an investment.
Participant #1 stated: “For the 90 percent portfolio [‘serious’ portfolio], I always do my
own research before investing. The other part [‘trendy or hot stocks’], it is still stocks, but
I look at it more like a casino.” He later specified that further independent research was not
always conducted for the social media influenced investments. Participant #2 generally tried
to find more than one source for an opinion to analyze. If he found something on Twitter,
he tried to find another person who shared the same opinion or see if the wall street journal
had written something about it. Similarly to Participant #2, Participant #3 explained that she
did occasionally look up descriptions about companies and look into their reports. However,
she mostly used her boyfriend’s advice and then gathered additional information to
formulate her own opinion. Participant #4 always conducted his own analysis and research
when making an investment. If advice or recommendations were advised to him, he always
looked into the company if it seemed enticing.

When asked about the importance of the price at the time of making an investment,
Participant #1 said that he did not buy a stock at any price and did not invest directly after
hearing or seeing a recommendation. His preferable method for purchasing was setting a
price range that considers a “good price” in his eyes to buy it at. Then, Participant #2 said
he did not wait to purchase a stock until the price was decreasing because he generally
invested in small amounts over time to prevent him from buying at a high price. Therefore,
if the price of an investment drops, the decrease would not be substantial. Unlike Participant
#1 and Participant #2, Participant #3 said “I care about the price a lot and will watch the
price of stocks constantly [and] if it is too high, I won’t buy.” Finally, Participant #4 said he
cared about the price of a stock depending on the purpose or outlook of the desired stock.

31
He stated: “The price matters if it will be a short term investment, like three months, and
will not if it is a longer term investment, like five years.”

Lower Financial Literacy

When asking the participants about if they viewed themselves as having the necessary
financial knowledge to make independent investment decisions, Participant #5 responded
that he felt independent to some extent but he would not say that he is fully independent. In
contrast, Participant #6 stated that she did not feel like she had enough knowledge to make
independent decisions. Instead she tried to use different sources to gather people’s opinions
and not solely base decisions on her own opinion. Although studying business, Participant
#7 did not believe that his education gave him these skills. He said “in school they don’t
really teach you about private economy and investing, which I think is a big issue”. He
proceeded to explain that he had gathered his information and learned about investing on
his own, but he still felt like he could not completely make decisions independently.
Participant #8 did not see herself as being financially knowledgeable enough to make
independent decisions and felt like it would be better if she had more knowledge to allow
herself to “comfortably” take on more risk with her future investments.

All of the participants, a part of the lower financial literacy group, stated that they invested
with more of a long-term goal than a short-term goal. When asked if they preferred to take
more risk in their investments or if they were more risk averse, Participant #5 stated that he
was more risk averse and conservative with his investing since he tried to invest with higher
risk in the past, which “backfired.” However, he also stated that he wished to take on some
more risk since he was young and felt like it was the right time for that. Participant #6 said
that she had some companies with high risk, but these were all companies that she believed
in for the future, so they were long-term but still “very volatile”. Participant #7 was a high-
risk investor since he invested a lot in CryptoCurrency. He felt like the long-term
perspective he had, 20 years, allowed him to take on more risk. In contrast to Participant
#7, Participant #8 liked to only invest in industries and companies with low risk that seemed
“very stable and safe over time”.

When asked if they found themselves to be more influenced by a company’s financial

aspects or by their product/service potential, Participant #5 described that he was mostly
influenced by innovation and potential, where he tried to look at what they could be and
evolve into in the future. Participant #6 said, “I would say I’m mostly influenced by
creativity and the new products they are creating. I am not sure if this is the best for
decisions, but I do also try to do my research into the financial parts but mostly the creativity
influences me, like new technologies for example”. Since Participant #7 invested mostly in
crypto currency and was not as invested in the stock market, this question was irrelevant to
him; however, he stated that all the stocks that he owned were “nothing special just the
normal stocks that everybody owns”. Participant #8 tried to look at both the financial aspects
and the potential product or service a company had before investing. Although she stated
that she mostly takes financial aspects into consideration, she was also interested in how
many owners and shares a company had. Later, she explained further that she would want
to only invest in companies that she believed would be doing “something good” and she
also “stands for”.

32
One important aspect that we wanted to investigate was if the interviewees conducted their
own research or just invested right after receiving information or recommendations.
Participant #5 told us that after he received information or a recommendation that “[he]
tends to look a bit at the trend and the p-number”. He said that if he was aware of someone
that was trustworthy and knowledgeable about the market, he liked to follow their
investment tips. However, he would always make sure to do his own research before
investing. Similarly, Participant #6 answered that she alway made sure to do her own
additional research. She stated that she did not really know what she was looking for, but
sometimes the research conducted was just to get a “gut feeling” if she should invest or not.
If it was a product that she believed in for the future, she would invest. She tried to keep her
cool and do her own research so that she could believe in the company for the long term as
well. She stated, “I am going to buy and stick to this, but if you believe that it actually has
a bright future it is easier to hold on to that stock for the long term”. In contrast to Participant
# 5 and #6, Participant #7’s response was that it depended on if he did his own research
or not whether he invested right away when receiving a recommendation. He elaborated
that it depended on the content of the information and how well this information was told
to him. Lastly, Participant #8 explained that she always made sure to do her own research.
She said that she did not just invest in a stock if someone told her about it because she
wanted to read about it and gain an opinion of her own before investing.

We asked the participants if they took price into consideration when receiving a
recommendation, meaning if they waited for a red day before investing or if they really
wanted to purchase the stock. Participant #5 responded that he usually waited for a red day
when investing. If given a recommendation to invest in a stock, he told us that it made him
feel like he was getting a bargain in some way. In addition, Participant #6 answered that she
tried to buy when the price was low; however, she felt like every time she bought the price
went down. So sometimes she did not successfully purchase on a day when the price was
low.

“It depends if the stock or crypro is in a bull market. A few months ago when the market
was down during COVID-19 my friends told me to buy some special stocks. And because
the market was low, I bought without taking red days into consideration. I am a long term
guy after all, so red days and prices are not relevant for me”. - Participant #7 explains.

For Participant #8, it depended on if the stock seemed to be “new” on the market. She tried
to look at how it had been going the last year, if it was “super straight up” and just green
then she waited. However, if it was something that seemed very stable and good and she
really believed in it then she would probably purchase it at the current price.

5.2.2 Source of Financial Information or Recommendations

Higher Financial Literacy

When asked about what sources the respondents used to gather their information,
inspiration, and recommendations for investments, the respondents that scored higher
results on the financial literacy test had varied responses. Participant #1 said that most of
his recommendations came from Avanza, which led to “heavily investing in Swedish
stocks.” As a result, he started using sources like Google Search and YouTube to diversify
his portfolio with international stocks. Additionally, Participant #1 allocated roughly 10
percent of his portfolio to “trendy or hot stocks” with the intention of making “abnormal
gains.” The main source of information for the investments from this portion of the

33
portfolio were from Reddit and other forum platforms because he believed that companies
can be “heavily impacted by non fundamental aspects.”

Participant #2 stated that “most of my information is from my brother and my brother’s

friends because they studied business and are interested in stocks.” Participant #2’s brother
had been the main source of information but he had also received advice from friends to
look into stocks that he researched on Twitter and Reddit. When advised by his friend, he
tried to find the source of information that was used by a person on social media because he
did not like information without “reliable sources.” Specifically, Participant #2 used Twitter
because he believed it was a good platform to find people’s opinions about stocks. After
looking through Twitter, he might look at other news media platforms to see more opinions
and information.

The main source of financial information and recommendations for Participant #3 was from
friends and social media platforms. Specifically, she used LinkedIn as a source of gathering
information while Instagram offered more recommendations for investments. Participant
#3’s preferred media for gathering information was from articles because it allowed her the
ability to take as much time as she needed to fully understand what was being discussed.

Finally, Participant #4 gave a detailed description of how he gathered financial information

about companies: “I usually check their balance sheet and income statement for the last
couple years because I am into the financing and accounting standards, [which] is my
primary thing when gathering information.” He went on to talk about how he looked up
companies online to see if he considered the business idea or product/service “cool.” When
searching for new companies, Participant #4 used the internet to search for companies
within specific industries and Avanza to search for companies based on certain
characteristics. He gave an example of searching for a company based on the country a
company was based from, like Canada. Participant #4 said articles and newspapers gave the
most in-depth information about companies and industries, which was why these media
types are the most influential.

Determining whether an individual had more belief and trust in their own opinion or
someone else’s opinion showed how much influence an outside source may have had on an
investment. Participant #1 said he trusted his own opinion more than others and he did not
trust recommendations from friends or family. However, he did say that he would listen to
the opinions of financial experts because “they need to have financial knowledge to be in
the position they are in.” Participant #2 trusted the opinion of someone he knew or a person
that had a reputation of making quality investments because he believed that they spend
more time looking at information than he did. All things considered, Participant #2 said that
he trusted a few specific people more than himself. Participant #3 stated that she did not
trust her own opinion more than others because she viewed herself as a new investor.
Nevertheless, she said that “ultimately, I base decisions on my own opinion and I ask friends
for advice when necessary.” Lastly, Participant #4 said “I would definitely trust myself more
than other people I don’t know because I can’t discuss with them and since I don’t use social
media, there would be no interactions with people I don’t know.” Additionally, he said he
discussed companies with his friends and sister's boyfriend but their opinions did not mean
more to himself than his own opinions.

34
Lower Financial Literacy

The participants were then asked about how they prefer to gather information or how they
receive recommendations for their investment decisions. We found out that Participant #5
found most of his information through newspapers that are proficient in finance. He claimed
to not use too much social media or follow any social media accounts about investment.
When finding new companies, he either looked through Dagens Industri or what the forecast
was saying. He added that he rarely got recommendations about investments but on the
occasion that he did, it came from friends that he knew possessed a wide knowledge about
the market which he wanted to listen to.

Participant #6 said “I usually find my information on the bank since they link recent articles,
the newspaper Dagens Industri and through listening to books about the stock market,
which can give some knowledge about how to think when investing and mention some good
companies to invest in”. She went on to mention Instagram, from which she believed the
usage has increased a lot with more active influencers, but that she tried not to read too
much into what they were saying. YouTube was another platform she mentioned for
gathering information, which she described as being a “great platform for getting an
introduction to a company.” After having received a recommendation and proceeding to
conduct her own research, she tended to google as a first step to get an overview of what
people said about the stock. Depending on the product, if she visited their webpage and it
was a product that she was interested in, she could see where they had started their journey
and what they had done so far. She added that she believed it was good to invest if the
government showed interest in the product since they had a lot of money to subsidize, or if
it was a bigger company that was growing a lot.

Participant #7 found most of his information before investing on social media, specifically
Instagram and Twitter. Instagram was the platform that he used the most, but he wanted to
increase his activity on Twitter since he believed that it was a great platform for finding
sources. He also read Dagens Industri, which he believed was great for news on what was
currently happening on the stock market, where he could both look at graphs and what they
wrote about new agreements and innovations that he found interesting. Sometimes he
looked at graphs from different websites and then continued on to YouTube to get a further
analysis of these graphs. He explained that he used the techniques demonstrated in the
videos which he then slowly used less and less once he got comfortable with these methods
of information.

Participant #8 received most of her information through recommendations. She stated that
she did not really try to look for new companies or discover new stocks to invest in through
her own research. Instead she got this information through recommendations from people
she knew and from there proceeded to conduct her own research about the company and
tried to make a choice. She explained that when she had received a recommendation, she
proceeded to search for it on the internet to learn what they said about themselves. She also
used Avanza and tried to look at their reports to see how the stock had developed over the
last couple of years and tried to get a wider knowledge based on that information.

35
We asked the participants if they trusted themselves or other people like an expert or
someone they knew personally more when making investment decisions. Participant #5 said
that he mostly trusted experts; for example, the experts that could be found on Avanza or
Dagens Industri. Participant #6 also said that she trusted experts and friends more than she
trusted herself when making decisions. Additionally, Participant #7 answered that he trusted
his friends more for investment decisions based on the lack of knowledge he perceived
himself having with stocks. He went on to say that he wanted to listen to his friends when
they told him something and then go from there to try and find additional information about
it. The people that he trusted the most when receiving recommendations were “[the] ones
that have reached great success these past 2 years”. Lastly, Participant #8 that trusted other
people that she knew personally but always made sure to do her own additional research.
She explained that she did not just invest in a stock because someone said so, she wanted to
read about it first and try to get an opinion on her own.

5.2.3 Social Media Usage & Influence

Higher Financial Literacy

When asked if there was a certain person that each respondent followed on social media or
followed closely on other media, the responses were all different. Firstly, Participant #1
followed financial personalities on YouTube and stated “that it is hard to not be influenced
by content, even though [he] tries to not be influenced by people that are rich.” Additionally,
he said TikTok and Instagram were two other platforms that gave little value and
unintentionally influenced him. Later on in the interview, Participant #1 said that there was
one specific guy that he was growing fond of that he used as validation for investments but
not as recommendations. Besides this one person, there were no other individuals that he
continuously used for insight, just general searches for reasonable people that were
formulating opinions about specific companies. Secondly, Participant #2 did not look at any
individual person or page, instead he looked for people who were established or recognized
as “good investors or analytical companies that seem reliable.” He usually saved “a person
if they seem like a reliable source and create content updating the specific information about
a certain stock.” However, he did reiterate that he did not follow or save people that offer
general financial advice or were not continually updating content. Then, Participant #3 said
she followed one person on social media that gave recommendations and created content
aimed at giving helpful tips to new investors on how to think and invest wisely. However,
she said that she was skeptical of the investment recommendations because “it is her money
and the opinion of one person is not the consensus.” Therefore, she utilized other sources
that would either support or disagree with the initial recommendation when formulating her
own investment opinion. Lastly, Participant #4 said he had only used social media one time
to make an investment and had not used or been influenced by social media since making
the investment. For the particular investment, Participant #4 saw a company listed on a guy's
portfolio on social media and decided to do further research on the company before making
an investment. Participant #4 stated that this person’s social media post was used solely as
inspiration. Social media did not supply the necessary information needed to make invest
decisions in Participant #4’s opinion. When discussing what the future looked like for
participant #4, who does not use social media in his investing and if he would ever consider
using social media for future investment decisions, he answers that he did not plan to or
think that he would change his investment process.

36
Due to the influence that social media has had on the movement of stocks and the
experiences that it has caused, asking the participants if they have invested in a certain stock
to be a part of the movement or experience was crucial. Participant #1 said he invested, only
what he could lose, in a stock just to be able to say that he was a part of a movement when
a stock was gaining really strong momentum on social media. Participant #2 invested to be
a part of a movement because he thought it would be fun to be a part of a viral movement
but he only invested what he believed he could lose. He explained that he wanted to be a
part of the movement because he thought it was fun and if the price of the stock was going
to blow up, he wanted to enjoy the returns. Despite Participant #3 researching companies
involved in movements or social media influences, she had never invested with the intention
of joining a movement or experience. She had been influenced to make an investment
decision that her close friends made; however, this was not following a major movement or
experience from social media or public perception. Lastly, Participant #4 said briefly “No I
don’t think so. No.”

The respondents were asked if they would expect higher returns from a recommendation
from a friend or someone they know or a recommendation from social media. Participant
#1 previously stated that the intention of his “trendy or hot stock” portfolio was to make
“abnormal gains,” which utilized social media as its main source of recommendations.
Additionally, he previously said that he did not trust recommendations from friends or
family. The response from Participant #2 was that he would expect to receive higher returns
from his brother or his brother’s friends because he trusted them and they had more
experience than his own friends or something that someone wrote on Twitter. Overall,
Participant #3 said that she expected better returns from recommendations made by her
boyfriend than recommendations from social media personalities. Finally, Participant #4
said it really depended on the person and source because he did not trust any kind of
recommendation without doing his own analysis to formulate an opinion about potential
returns.

Lower Financial Literacy

When discussing social media usage and influence, Participant #5 stated that he never had
followed any accounts on social media that gave investment. However, he had seen different
accounts and looked at their pages but never acted upon the tips that they had given or
actively followed them. He did not really get inspiration from these accounts but explained
that it could be related to the fact that he had not been investing as much lately.

“I recently started following sparandestudenter and 100milonersmannen on Instagram, but

I try to keep my cool when it comes to acting upon the influence since it’s been going very
well for everyone this last year. I think that many people might be taking on too big a weight
to carry on their shoulders and that they don’t really know what they’re doing. However, I
looked into 100milonersmannen and he invests for long term and has some really good
companies, so I think I might just copy paste some of his portfolio” says Participant #6 as
she is talking about her social media usage.

Participant #6 went on to tell us that she did not let herself be too influenced by social media.
She liked to read what it says and then after looking into companies and different aspects.
She found that social media gave the “first step” of information, which she then deepened
with further research. “It’s like with all things the more you see about for example wine, the
more you will think about wine” she says, referring to the fact that the more content about
investment tips she saw on social media, the more she would probably think about it which
would lead to her being more influenced by it. When discussing which kind of content or

37
media she found the most influencing, the respondent mentioned that titles of articles were
what impacted her the most. She added that she did not feel like a picture said that much,
but she was keen on videos and texts that explained more in depth of what was going on.

Participant #7 mostly used Instagram and some Twitter but wanted to start using Twitter
more in the future. He followed approximately 20 profiles on Instagram that gave financial
advice or motivation. The people that he followed are the ones that had success. He liked to
search on Instagram for specific things and found the profile that had the most followers
then proceeded to check if they had a YouTube channel to see if there was more content
uploaded there. The usage of social media for Participant #7 wass more about motivation
than inspiration or information. He found that on social media they could announce news
that gave him some motivation to keep investing and believing in it. When we asked why
he chose to use social media over other alternative sources, he responded that he felt like
many newspapers try to be neutral and only supply you with the information. In contrast,
social media was a platform where everyone said what they thought and shared their
opinions and knowledge. The content that appealed to Participant #7 the most when
investing was a combination of graphs and potential.

In contrast, Participant #8 did not really use social media for inspiration or information when
making investment decisions. She said that for some unknown reason she was not a big fan
of it. She said that she had seen profiles like 100milonersmannen etc. and that some of her
friends followed similar accounts. She said that she did not know if these accounts are good
or bad, but that they did not really have any effect on her investment decisions. She
proceeded to mention that one social media she was active on was a Facebook group for
one of the stocks that she had invested in. This group allowed people to upload news about
this specific stock, she said: “It is not like people post recommendations on when to buy or
sell in the group, it is simply just news and updates about the stock”.

In light of the recent GameStop incident, we decided to ask the participants if they ever
invested to be a part of a movement. Participant #5 answered that he never had invested to
be part of a movement or similarly but knowing the outcome of the GameStop incident he
would not consider investing if something similar occurred in the future. In addition,
Participant #6 answered “I guess I would say back in 2016 when I invested in crypto, it was
like ‘the movement’. Not that many people in Sweden did it though because it was very hard
to find the right platform and where you wanted to invest”. Participant #7 said that after the
GameStop movement he invested in a Cryptocurrency that was being hyped on social media
and related that to having been a part of a smaller movement. In contrast to this, Participant
#8 had never invested to be a part of a movement.

We asked the participants if they expected a higher or lower return based on where they got
their information. Participant #5 responded “I believe that social media gives you a higher
risk and more reward, since they can lurk hidden or new companies, while big papers like
Dagens Industri focus more on bigger established companies which might be lower in risk”.
Participant #6 stated that what she expected in return depended on which type of stock or
fund it was. She told us that she did not expect higher returns from the start when it was
regarding some companies that had slower growth but that she still believed in the future.
Nevertheless, she answered that if she would make an investment based on a
recommendation from a friend she would assume a higher return during a shorter time
frame. When asking Participant #7 if he expected higher returns from recommendations, he
responded that it depended and that at the end of the day, it was all equal. Participant #8
said that she believed more in the people closest to her that have financial knowledge than
people on social media. So, when they gave recommendations, she expected a higher return
since she knew that they would never recommend something that was bad.

38
The two respondents #5 and #8 who answered that they did not really use social media or
are influenced by it were asked if they would consider starting to use it in the future.
Participant #5 responded that he was not totally against using social media and that it was
more of an unexplored area for him, he stated that he could consider collecting some
information from social media in the future if he found the sources to be trustworthy and
knowledgeable. Then he would proceed to look into their tips through his own research. In
contrast, Participant #8 was more hesitant to use social media. She felt like some accounts
are very hyped up and might not be trustworthy, which was why she preferred to discuss
personal subjects like investing with people she knew and trusted. She stated that she would
consider starting to gather information on social media if she became a big investor and
more into it, since that would be helpful when keeping up with the latest news.

When discussing the future with the participants that already used social media, Participant
#6 said that she might consider changing the way she gathered information in the future and
started using social media more. During the interview, she said that she did not have the
time to read a lot about different choices. However, she hoped that in the future she would
have more time to spend on it which could help her make more independent decisions.
Participant #7 commented that he would like to start using Twitter more in future as he
thinks that it was a good platform for news. He also said that, after the GameStop incident,
he overall saw himself using social media more in the future.

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6 Discussion
The intention of the discussion chapter is to identify the connections from the results
and elaborate on the connections to previous research. This chapter is divided into
three sections: Financial Literacy, Social Media, and Alternative Groupings where the
results will be discussed and compared with previous research in detail.

6.1 Financial literacy

In order to gain an enhanced understanding of the respondents' financial literacy, we
conducted a preliminary test that would determine the financial literacy of the respondents
without taking into account their educational background. Due to some people’s educational
experiences and progress, their understanding of financial concepts, like interest
compounding and risk diversification, was expected to differ depending on their educational
programs. The respondents that studied finance were expected to have higher scores than
the respondents that studied non-business related subjects because of the exposure that
business students have to financial concepts. However, there was no connection between
higher financial literacy and business related educational background, which opposed the
findings from Lusardi & Mitchell (2007, p. 219). Two possible reasons why the results from
our study and the results from the study by Lusardi & Mitchell (2007) were different would
be because Lusardi & Mitchell (2007) conducted a study that consisted of 1,984
observations. This number of people is substantially more than the number of participants
in our study, eight. Additionally, the age of the respondents from Lusardi & Mitchell (2007)
ranged from 51 to 56 years old; conversely, the respondents from our study ranged from 20
to 25 years old. Ultimately, the difference in sample size and age range could be a key
explanation as to why there are opposing results between these studies.

Since only two out of four respondents within the higher financial literacy group have
business related educational backgrounds, there was no connection between educational
background and financial literacy. We believe this happened because the financial concepts
needed to score highly on a financial literacy test are not always covered by university level
business courses, which could be one explanation why there was not a relationship between
educational background and financial literacy. Furthermore, a person with a high degree of
numeracy with no business related education would have the capability of scoring highly
on a financial literacy test. The notion that a person’s numeracy is correlated and used as a
behavioral predictor for financial decision making was proven in a study conducted by
Ghazal et al. (2014, p. 22). As a result, simply assuming the financial literacy based on the
educational background would not have correctly aligned the financial literacy of the
respondents.

A result from the financial literacy test that could be explained because of the findings from
Klapper et al. (2016) was the gender placement within the lower and higher literacy groups.
Two of the three females a part of the study were in the lower financial literacy group while
three of the five male participants were in the higher financial literacy group. This result
aligns with a conclusion stated by Klapper et al. (2016, p. 12) that there was an overall
difference in financial literacy between men and women. Based on their study, men were
considered more financially literate than women, which took multiple variables into account
(Klapper et al, 2016, p. 12). Furthermore, the study conducted by Klapper et al. (2016)
consisted of a much larger sample size compared to this study's sample size of eight
individuals. Additionally, the study by Klapper et al. (2016) consisted of people from

40
various geographical locations and educational experiences, which our study did not.
Despite all these major differences, the results from our test align with the conclusions
drawn by Klapper et al. (2016, p. 6).

Based on the responses to the question of whether the interviewees thought they possessed
the financial knowledge to make investment decisions independently, we were able to
identify a relationship that was consistent among the participants that were within the lower
financial literacy grouping. All four individuals in the lower financial literacy group stated
that they did not believe they possessed the necessary financial knowledge to make
investment decisions independently. On the other hand, only two of the four individuals
within the higher financial literacy group stated they believed that they possessed the
necessary financial knowledge to independently make investment decisions. A reason why
every individual a part of a lower financial literacy group would say they do not have the
abilities to make investment decisions independently is because they are aware of the lack
of knowledge and expertises that they possess. An alternative reason, which has been
supported by multiple studies, states that the greater understanding a person has about
financial concepts, the more likely they are to participle in financial markets (Almenberg &
Dreber 2015; Christelis, Jappelli, & Padula, 2010; Van Rooij, Lusardi, & Alessie, 2011;
Yoong, 2011, cited in Klapper & Lusardi, 2020, p. 590). This theory would explain why the
lower financially literate people are not as involved in the decision making process
compared to the two individuals a part of the higher financially literate group that are more
involved by independently making decisions.

When making an investment or purchasing a stock, the price is an aspect that can be
accounted for during the decision making process. Three out of four participants among the
lower financial literacy group responded that the price was important when purchasing a
stock or making an investment. This majority states that the price of a stock is extremely
important to them and they want to invest when the price is low. Participant #7 stated that
his long term perspective allows him to not worry about the price, which was contrary to
the other participants a part of the lower financial literacy group. On the other hand, the
individuals a part of the higher financial literacy group all had differing opinions regarding
the price. This made us believe that the people in the lower financial literacy group are
focused on ‘getting the right price’ or a price that is viewed as a ‘good value.’

When analyzing the responses of whether the financial performance/calculations or the

product/service idea of a company, there was not a consensus among either group; however,
a trend could be identified based on the financial literacy of the respondents. Three out of
four participants within the higher financial literacy group said they were more influenced
by the financial aspects of a company rather than the product/service idea of a company.
Based on these responses from our study, people with higher financial literacy were more
influenced by the financial performance of companies. On the other hand, two out of three
individuals a part of the lower financial literacy group stated they were more influenced by
the aspects related to the product or service idea of a company rather than financial analysis.
As a result, respondents with lower financial literacy were more influenced by the product
or service idea of a company. These trends align with a conclusion made by Skagerlund et
al. (2018, p. 18), which stated that a substantial portion of the construction of financial
literacy is attributed to numeracy. This could explain why the individuals a part of the higher
financial literacy group are more influenced by the financials of a company. Moreover,
Skagerlund et al. (2018, p. 19) used a Swedish population of adults, which could be a further
explanation as to why the results were aligned despite Skagerlund et al. (2018) conducting
a study that consisted of 2,060 observations. As a result, there is a clear similarity between
the conclusions amongst our study and the study conducted by Skagerlund et al. (2018).

41
6.2 Social media
Social Media plays a major part in this study where we want to investigate how social media
influences investment decisions. We noticed that five out of eight of our participants used
social media in some capacity when making investment decisions (#1, #2, #3, #6 & #7).
Despite more than half of the respondents using social media, the usage and influence of
social media among the two groups varied but not in any significant way. Three out of the
four individuals apart of the higher literacy group used social media as a source of
information while the lower literacy group had only two out of four people using social
media. After closely examining the responses of all interviewees, it was evident that there
was no relationship between the usage of social media and educational background, gender,
financial literacy, or any other potential variable answered from our respondents. With that
said, social media clearly influenced and was utilized by the participants of our study even
though there was no predictive behavior or determinant. Our findings can be compared with
what Siikanen et al., (2018) found when examining if individuals' decisions to trade in
Nokia are driven by Facebook activity. In comparison to our grouping of higher and lower
financial literacy, Siikanen et al., (2018) groups their respondents into more sophisticated
investors - like financial institutions - and less sophisticated investors - like non-profit
organizations and households. In contrast with our findings that there is no definitive
relationship between individuals usage of social media when making investment decisions
based on their financial literacy, Siikanen et al., (2018, 211-212) found that the less
sophisticated investors' decisions who trade in Nokia are connected to Facebook data, while
more sophisticated investors are not connected to Facebook data. We expected to get similar
results as Siikanen et al., (2018) that the higher financial literacy group use less social media
and that the lower financial literacy group use more, however, Siikanen et al. (2018) had a
total sample size of 282,269 investors where 268,363 of the respondents are made up by
households and the remaining 13,906 investors are made up by companies, financial
institutions, governmental institutions and non-profit organizations. There is a very large
difference in sample size between our study and the sample size utilized by Siikanen et al.
(2018), which could indicate that the results we gathered on social media usage when
making investment decisions might look a lot different had the sample been larger.

From our interviews, we noticed that the most utilized social media platform to use was
Instagram, with four out of five participants stating that they use to some extent making up
80% of the respondents. The second most popular platform was Youtube which 60% of the
respondents use in their decision making which was mostly used to get further knowledge
about a company. We found that Twitter and Reddit equally had 40% of usage since only
two people claimed to use these platforms. Despite its growing popularity and being the
second most downloaded app on Android and fifth most downloaded app on App Store in
2019 (Anderson, 2020, p.7), TikTok was not a popular social media platform to use for
investment decisions among our respondents. Only Participant #1 discussed TikTok and
said that he might become unintentionally influenced by content he sees there, however it
is not a platform he actively uses for information. This information is comparable with
Auxier & Anderson’s (2021) research on individuals' social media usage. Their findings
reported that Instagram has a usage of 71% which is a little less than our research showed
with 80%, but still quite similar. Twitter and Reddit, which equally had 40% usage within
our sample, had quite similar results in Auxier & Anderson’s (2021, p.7) study which
showed Twitter with 42% and Reddit with 36%. TikTok is the one exception where our
findings did not match, Auxier & Anderson (2021) reported it as one of the most popular
apps with 48% usage, but within our research it was not a popular platform to use for
investment decisions. However, Auxier & Anderson (2021, p.10) had a sample size of 1,502

42
individuals where 220 were made up by young adults compared to our sample of eight
observations, therefore this can be an explanation why some of the results differ.

Considering the GameStop event where users on the Reddit community “WallStreetBets”
created a chain like effect where people started to invest in the company to drive stock prices
up (Pedersen, 2021, p.29), we wanted to investigate if any of our respondents ever invested
in a similar movement. A total of 50% of our respondents have previously invested to be a
part of a movement, unsurprisingly we found that these participants are also the only ones
who use social media in their investment decisions. Two out of three that use social media
in the higher financial literacy group have invested in a movement, similarly for the lower
financial literacy group we found that the same two people that use social media have
invested to be a part of a movement. Furthermore, we found that out of the group that scored
lower on the financial literacy test only Participant #6 and #7 like to take on more risk with
their investments, conveniently these two were also the only participants from this group
who liked to use social media when gathering information and invested to be a part of a
movement. In contrast Participant #5 and #8 who did not like to use social media or found
themselves to be influenced by it were also very risk averse with their investments and never
invested to be a part of a movement. From the higher financial literacy group such
comparisons that the individuals who use social media are also the ones who are more risk
tolerant cannot be made as both Participant #2 and #3 used social media in their investments
but viewed themselves as risk averse investors. Participant #1 and #4 viewed themselves as
more risk tolerant investors, where Participant #1 uses social media and has invested to be
a part of a movement but Participant #4 does not use social media and have never invested
to be a part of a movement. Based on these findings we can see a connection between social
media usage and investing to be a part of a movement, however no definite connections
could be made between social media and risk tolerance, as only the lower financially literate
group had consistency between these variables.

6.3 Alternative Groupings

In this research, half of the respondents studied business and the other half studied other
programs of higher education, where both the higher and lower financial literacy groups
were 50% each of business and other. We found that in the group of higher financial literacy
Participants #2 an #3 who do not study business are more risk averse with their investments,
while Participants #1 and #4 who do study business are more risk tolerant and either already
have or want to increase their risk. Meanwhile in the lower financial literacy group the
respondents who like to take on more risk are Participants #6 and #7, of these two there is
only one who studies business, while the other respondent studies a veterinarian program.
In the lower group we cannot therefore make any assumptions that the ones who study
business are more risk tolerant than the ones who do not. However, taking a overlook of
both the groups disregarding their financial literacy level we can conclude that even though
the respondents who study business are divided into different financial literacy groups we
can still see that overall the respondents who study business are the ones who are more keen
towards taking on risk, where three out of four of the business students say they have some
risky investments in comparison to the one out of four of the respondents who studies other
programs who are risk tolerant. According to Halek & Eisenhauer (2001, p.22) and Ardehali
et al., (2005, p.103) younger people and men tend to be more risk tolerant. From our
research we disregard age as all the respondents are in the same age group, we can however
see a small theme that males tend to be more risk tolerant than females as only one of the
four respondents who said they take on risk were female and the rest were males. This is
also in agreement with Hallahan's et al., (2003, p.66) findings that females have a lower
fondness for risk than males. However Hallahan et al., (2003) had a sample of 20,415

43
observations, which were made up by 5971 females and 14,444 males. This is a very large
sample compared to our eight observations where only three were females. Our small
sample of three females can indicate that there is not enough support in our research for
females being less risk tolerant than males even though it is in agreement with Hallahan et
al., (2003) findings, therefore it would be suitable to make additional research with more
participants.

Additionally, we found that respondents from the higher financial literacy group with an
educational background in business tend to make more independent decisions than the ones
with another educational background. However the business background did not give
support for independent decision making in the group with lower financial literacy, meaning
we do not have full support that the educational background allows our respondents to be
able to make more independent decisions. Participant #1 & Participant #4 who can make
more independent decisions are also the only ones that trust themselves most and do not
really take advice from friends. Meanwhile the rest of the respondents answer that they do
not really trust themselves most with investment decisions, but instead trust friends or
experts most. What we noticed instead was that none of the respondents in the lower
financial literacy group felt like they could trust themselves with investment decisions.

An interesting observation is that the people with business as their educational background
expect a higher return from recommendations they’ve received on social media, experts
other platforms than friends, while the participants with other educational backgrounds
usually expect higher returns when a friend or someone they know gives them a
recommendation, since they believe that someone they know personally would not give
them a bad recommendation. The perception of receiving a higher return from
recommendations can be differentiated between the genders because all the three female
participants, not depending on their literacy level, stated that they expected a higher return
from recommendations from friends. Conversely, the males answered that they perceive to
gain a higher return of recommendations from social media or experts.

Another connection between gender was based on the responses from the female
participants about the importance of price when making an investment. Two out of the three
female participants stated that they care about the price when making a purchase and buy
when the price is decreasing. The other female participant stated that she would care about
the price depending on how long a company had been on the public market. As a result two
of the three female participants care about the price and the remaining female cares about
the price under certain circumstances.

44
7 Conclusion and Recommendations
The purpose of the conclusion chapter is to summarize the key findings and
connections identified throughout the result and discussion chapters. Additionally,
there are subheadings that discuss the theoretical & practical contribution, limitations
and further research suggestions, and quality criteria.

Based on the participants’ responses from our study, the result of whether social media
influences investment decisions based on an individual’s financial literacy is evident. We
find that there is no definitive or reoccurring influence of social media on the investment
decisions of individuals based on their financial literacy. This conclusion is clearly
identified because both groupings consisted of individuals utilizing and not utilizing social
media as an influence for investment decisions. Therefore, we find no clear link between
the financial literacy of an individual social media influence on an investment decision,
based on the geographical location, age, gender, and educational background of our
respondents. Despite this result, one palpable similarity is present amongst every participant
of this study, which highlights the importance of this research topic. Every respondent has
had at least one instance of social media influence or experience whether they intentionally
or unintentionally used social media as a reference or unexpected circumstance. This
relationship shows how much impact social media has on the investment decisions of the
participants because even if they are unaware of the ramifications of utilizing these
platforms for non-investing purposes. Subsequently, gathering further information and
expanding the current knowledge of the influences that social media has on people’s
investment decisions must garner additional deliberation.

From our collected data, Instagram proved to be the most used social media platform for
information or inspiration before investment decisions were made. Out of the five
participants that used social media, four of them used Instagram in some capacity. The
second most used social media platform was Youtube, which was used by three out of five
participants. Both Instagram and Youtube are visually based platforms, which tells us that
the most influential social media content comes in the form of pictures and videos. In
contrast, Twitter and Reddit, which are not visually based platforms and provide
information in the form of text, were significantly less used among our respondents and do
not have the same influence that visual platforms have.

7.1 Theoretical & Practical contribution

This study contributes with new theoretical information that can be used by researchers and
other interest groups to read and gather new knowledge about the phenomenon, and also as
a base for future studies that want to further research this subject. The subject of social
media's effect on an individual's investment decisions based on their financial literacy has
so far been an unexplored subject that has not been studied yet. Therefore, this new research
contributes with additional theories that can help describe an individual's investment
decision and how social media influences it. Despite the study not showing a relationship
between financial literacy and social media usage for investment decisions, the common
connection that every participant has had intentionally or unintentionally been influenced
by social media is a compelling and thought provoking finding. These theoretical
contributions can be used for further research to investigate existing dominative
characteristics that result in an individual using social media more in their investment
decisions.

45
Due to the research conducted and knowledge gained from our study, the practical
contributions from the results are apparent and pertinent. As technologies advance that grant
the ability to individually and independently manage their financial future, understanding
the components and platforms that are utilized when making decisions and looking for
recommendations will be crucial. Simultaneously, the continued growth of social media
users and platforms will create the potential for people to intentionally or unintentionally
become influenced by social media content. Consequently, studying the impacts that social
media has on the investment decisions of people can enlighten the public about the
implications and influences associated with using social media directly or indirectly for
investment purposes. Our study can be viewed as a single step in the process of identifying
the characteristics or personal preferences associated with the influence social media can
have on the investment decisions.

7.2 Societal and Ethical Implications

Developing an understanding of how social media influences investment decisions will be
monumental in identifying the potential societal implications for a multitude of
stakeholders. Moreover, recognizing how each stakeholder could be impacted by a
continued increase in social media activity and financial independence may illuminate the
future outlook of investing. The implications for social media users are evident and blatant
based on the responses from our respondents. Every single interviewee was influenced
intentionally or unintentionally by social media when making an investment decision. This
potentially means that people utilizing social media for non-financial related reasons could
be influenced by uneducated or unethical recommendations. Resulting in investments that
are not based on sound financial principles and longevity. Additionally, general investors
could be impacted due to the drastic increases in stock prices mentioned and publicized by
social media platforms. This could cause fully rational investors to become curious about
the recommendations and discussions being carried out on various social media platforms,
which would again result in more people investing in uneducated or unethical
recommendations. Despite these examples of societal implications for unprofessional
stakeholders, there are also implications for stakeholders directly associated with the
financial industry. Both financial and institutional banks as well as financial advisors could
be heavily impacted in the future. The financial and institutional banks could have their
strong positions identified and discussed on social media platforms, which would be a
similar situation to the GameStop debacle when hedge funds lost billions of dollars
(Helmore, 2021). Then the financial advisors may struggle with their customers having
inconceivable expectations about returns because of the drastic changes caused from social
media mobs. All these societal implications are possible given the current trends and
developing an understanding of the impacts that social media has on investment decisions
will be pivotal in determining exactly how the various stakeholders will be affected.

The ethical implications related to the increased activity of financial advice and
recommendations on social media platforms can create an environment that promotes
content for the wrong reasons. This issue originates with the unethical behavior of giving
advice without the necessary knowledge or education to make thorough conclusions. Due
to the lack of restrictions, people can write any opinion without the information or research
to support their claim. Therefore, these recommendations are not following the same criteria
used for professional financial advisors, which have specific regulations and
accountabilities to limit the amount of heinous actions. An example of an unethical situation
that recently occurred was the event affecting the GameStop stock where members of the
Reddit community “WallStreetBets” acted as a mob to drive the stock price up (Pedersen,

46
2021, p. 29) could be considered unethical since the members giving advice might not have
the necessary financial knowledge to do so. This could lead to devastating effects for people
taking the advice as they think it is considered good, but instead end up losing a lot of
money. Furthermore, it can be considered unethical to spread the word of investment advice
with the sole intention of personal gain or benefits on social media, as that has the ability to
reach a large population of people. Since the platforms have seemingly unlimited reach,
discussing investments with the main purpose of validating an investment would not be
ethical because the motives of the content creator would not be disclosed.

7.3 Limitations and Further Research Suggestions

Due to our study consisting solely of Swedish born and raised individuals, the results based
on their responses cannot be directly applied worldwide because cultural differences and/or
different access to information could result in different trends. For further research on the
subject it could be interesting to investigate if there is a difference in social media usage in
other countries compared to Sweden, and how these participants view social media’s
influence over investment decisions.

Additionally, this study was limited to individuals with a higher educational background i.e.
university level. We found that educational background was not a determinant of influence
of social media; however, since all of the interviewees studied at a higher educational level
it could indicate that people with differing educational backgrounds may conclude opposing
results. Further research could be conducted with participants who never studied at a
university level to investigate if there are any differences in social media influence and
usage. Additionally, two out of the three female participants in our research use social
media. This could indicate that gender is a characteristic that could determine social media
influence and usage. However, since our sample only included three females, we do not
have enough support to accurately back this statement up. As a result, this subject could be
empirically tested with a larger sample in future research to determine the significance.

The age range of the participants was limited to 20 to 25 years old which encompasses a
minuscule portion of potential ages of respondents. As a result of the limitations of the
findings from this study, the trends and connections concluded are only applicable to
samples from this study. Since all our participants are within the same age group, further
research can be conducted where different age groups are included, which potentially could
provide a better insight into the research question of how social media influences investment
decisions. An investigation if younger people tend to use social media for investment
decisions more than an older age group could be a relevant comparison.

From this research, we have gathered that the usage of social media seems to be more based
on personal preferences than financial literacy. Therefore, it can be further looked into to
identify specific personal preferences that could illuminate any particular preferences
associated with the usage of social media. For this study, the qualitative approach was
chosen since it allowed us to get more in depth answers from the respondents about their
investment decisions. Since this approach was chosen, we were limited to a smaller sample
size, meaning that the sample is not representative of an entire population. As a result, a
suggestion for future research is to conduct a similar study but with a qualitative approach.
This approach allows for a larger sample, where a survey can be constructed to investigate
if social media usage and investment decisions are correlated to different characteristics,
like age, gender, education and personal preferences.

47
7.4 Quality criteria
The quality criteria for this thesis are based on Lincoln & Guba (1985 cited in Cope, 2014,
p.89) original four criteria credibility, dependability, confirmability and transferability to
reach and develop a trustworthiness for the thesis, which today is the most common criteria
used to evaluate qualitative research.

The first criterion credibility refers to the confidence in the truth of the research
observations. It establishes if the collected data represent credible information and correct
interpretation of the participants' original views and opinions (Korstjens & Moser, 2018,
p.121). Cope (2014, p.89) writes that the researcher(s) should demonstrate commitment,
review trails and methods of observation to support the credibility when writing a qualitative
study. The credibility of data relies upon the possibility of investigating its meaning during
semi-structured or in-depth interviews (Saunders et al., 2016, p.398)

The authors of the thesis have maintained credibility of the research all throughout the
process of writing, and we feel confident in the truth behind our findings. The credibility
was confirmed through semi-structured interviews where the participants could provide
more in-depth answers and elaborate explanations of their behaviors and opinions towards
the questions that were raised during the interview process. To try and eliminate lying or
false information, we instructed the participants to not use Google, a calculator or ask for
help to conduct the financial literacy test as we wanted to achieve as accurate results as
possible. During the interviews there was no way for us to control the trustiness of the
answers as it was one on one interviews based on the participants' own behaviors and
opinions. The interviews and the financial literacy test were both conducted voluntarily and
anonymously by the participants who had the right to stop or end the interviews at any time.
Given these circumstances, we do not believe that there are any reasons why the participants
would speak untruthfully and believe that their answers were credible and trustworthy.

The second criterion is transferability, this measures the degree to which the results of the
research can be applied to other circumstances or situations with other respondents
(Korstjens & Moser, p.121). The context of a behavior and/or experience must be described
so that they also become meaningful and relatable to an outsider (Korstjens & Moser,
p.121). Meaning that the criterion is met when individuals and readers outside of the study
can relate the results to their own experiences (Cope, 2014, p.89). The aim was to investigate
the behavior of our participants and find a pattern between financial literacy and social
media usage in individuals investment decisions. The findings from this thesis are likely to
be applicable for other individuals as they might relate to some of our participants’ opinions
or experiences with investing. However, this study cannot generalize or state that the
findings of social media usage based on financial literacy can be relatable to an entire
population, as the sample is limited. Therefore, the findings from this thesis can be used as
a framework for future research on the investigation of the subject.

The third criterion dependability refers to the stability of findings over time. This
trustworthiness measure involves the participants interpretation, recommendations and
evaluation of the findings so that all are supported by the collected data from the participants
of the study (Korstjens & Moser, p.121). Bryman and Bell (2015, p.403) describes that the
research should implement an auditing approach according to this criterion. Meaning that
records of all the phases during the research process should be kept in an accessible way
through assigning peers as auditors who assess the defense for the findings. The
dependability criterion of this thesis has been met as an auditing approach has been applied.
This thesis has been peer-reviewed and provided constructive criticism throughout the

48
research process. Records of all the research phases such as the financial literacy test results,
recordings and transcriptions of the interviews, have all been properly documented and kept
in a shared file that both the authors could access, allowing us to modify and compare the
obtained findings.

The fourth criterion, confirmability, describes the credibility and validity of the data and
findings of our study (Korstjens I. & Moser, A., 2017, p. 121). In order to verify the validity
of the findings from our study, we established a process that would allow us to clearly state
the opinion or response given by our participants. Before conducting our interviews with
the participants, every individual was asked if recording the interview was acceptable,
which every participant accepted. Recording the interviews allowed us to transcribe every
response word-for-word to ensure that the opinions and statements were accurately and
clearly portrayed in our results. Additionally, both quotations and paraphrases were utilized
when writing the results because the transcribed responses allowed us to clearly state what
was said. When deciding between whether a response would be quoted directly or
paraphrased, we chose to directly quote an individual if the responses contained subjective
wording that paraphrasing would not be able to accurately restate. Alternatively, we
paraphrased if the response was convoluted or initially vague and further questions needed
to be asked to the individual to clarify their response. Due to our initial process implemented
to accurately state the responses of our participants, we were able to derive meticulous
connections and findings based on our results. Therefore, all of the findings discussed and
identified in our study are reliable and authentic. As a result of recording the interviews and
establishing set guidelines to follow regarding the interpretations of our findings, we have
conducted a study that has provided data and findings that are uninfluenced by our own
imagination or interpretation.

49
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Appendices
Appendix 1
Financial Literacy Test by Klapper et al., (2016, p. 6)
RISK DIVERSIFICATION
Suppose you have some money. Is it safer to put your money into one business or
investment, or to put your money into multiple businesses or investments?
• one business or investment
• multiple businesses or investments (CORRECT)
• don’t know
• refused to answer

INFLATION
Suppose over the next 10 years the prices of the things you buy double. If your income also
doubles, will you be able to buy less than you can buy today, the same as you can buy today,
or more than you can buy today?
• less
• the same (CORRECT)
• more
• don’t know
• refused to answer

NUMERACY (INTEREST)
Suppose you need to borrow 100 US dollars. Which is the lower amount to pay back: 105
US dollars or 100 US dollars plus three percent?
• 105 US dollars
• 100 US dollars plus three percent (CORRECT)
• don’t know
• refused to answer

COMPOUND INTEREST
Suppose you put money in the bank for two years and the bank agrees to add 15 percent per
year to your account. Will the bank add more money to your account the second year than
it did the first year, or will it add the same amount of money both years?
• More (CORRECT)
• the same
• don’t know
• refused to answer

Suppose you had 100 US dollars in a savings account and the bank adds 10 percent per year
to the account. How much money would you have in the account after five years if you did
not remove any money from the account?
• more than 150 dollars (CORRECT)
• exactly 150 dollars
• less than 150 dollars
• don’t know
• refused to answer

55
Appendix 2
Interview Guide
General Questions:

1. What do you study?

2. Have you taken any business courses?

3. Do you believe that you possess the necessary financial knowledge to make
investment decisions independently?

4. How often do you invest? Do you view yourself as an investor or trader?

5. Where do you find your information before you decide to invest in a stock?

6. How do you discover new companies to invest in?

7. Do you invest with a long term or short term goal?

Investor Influences:

1. Have or do you plan on changing the source of financial recommendations? (Example,

if you use Twitter, do you plan on using another platform) If so why?

2. Do you trust your own options in a company more than another person’s?

3. Are there certain metrics that people mention that are influential in persuading your
decision to invest or not?

4. Is there a kind of content that is more influential? Example, a tiktok video may be
more influential and a picture on instagram.

Individual Stock Questions:

1. What made you buy the last stock you purchased? What source did you use to find that
stock?

2. Do you consider price when purchasing a stock or just follow the advice you
receive/find?

3. Do you prefer to make investments with higher or lower risk?

4. Do you expect to get a higher or lower return based on where you find/ who gives you
the recommendation?

5. Are you more influenced by physical measures (financial evaluations) or hypothetical

measures (opinions or outlooks, like new products)?

6. Do you trust the opinion/recommendation of a person you dont know more than a
person you do know?

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Social Media Questions:

1. Do you get inspiration from social media platforms when investing?

2. What is your prefered social media platform to get financial knowledge from? Why?

3. Have you made an investment solely based on information you found from social
media?

4. If you get influenced to invest in a stock through social media do you then look up
additional information about it to be certain of your choice or do you simply invest?

5. If you use social media as an influence, do you follow the returns or success of the
individual recommendations made by the content creator?

6. What makes you trust an individual’s recommendations whether on social or other

platforms?

7. Why do you use social media platforms for financial recommendations when there are
alternative options?

8. There are several accounts on platforms like Instagram that focus on giving investment
tips, like investmentcouple, ungaaktiesparare or spargurun and pengabingen just to
name a few. Do you follow accounts like this to get inspiration/help with investment
choices or do you visit similar pages?

9. Twitter is a platform that a lot of people use for news, which includes a lot of news
about the stock market. Is this a platform you use to get news about the stocks you’ve
invested in or new ideas of what to invest in?

10. Have you ever been influenced to invest in a certain company by an influencer? Do
you get influenced?

11. Have you invested in a company to be a part of a movement or experience?

Questions for non-Social Media users:

1. If you do not gather information from social media, how or where do you find your
information?

2. Would you ever consider gathering information or looking for inspiration for future
investments on social media? If so, why? Why not?

Do you believe that social media can have an influence on decision making?

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Business Administration SE-901 87 Umeå www.usbe.umu.se