19 Sep 2025
Recently, Dr Haili Wu from Department of Economics, International Business School Suzhou (IBSS) at Xi’an Jiaotong-Liverpool University (XJTLU) has published the research entitled “Cultural Biases in the Investment Decision-making Process of Institutional Investors” on International Review of Financial Analysis (IRFA) as a single author.
With reference to a large sample collected between 2014 and 2024 of nearly 300 fund managers, Dr Haili Wu draws on both qualitative and quantitative studies to examine how cross-cultural differences influence institutional investors’ investment decision-making. By so doing, it investigates whether there are significant cultural biases in investment behaviours, in addition to the cognitive and emotional biases found in previous finance literature. The findings indicate that Chinese fund managers—in contrast to Western fund managers—paid more attention to macroeconomic information, were more likely to adopt a top-down approach, tended to have a shorter stock holding period on average and for losing stocks, in particular, and tended to evaluate a company according to its context. This evidence of systematic behavioural differences between two cultural groups indicates that investors may habitually underrate some investment information or strategies because of their cultural biases, which could have significant implications for traditional finance theory, investment practice, (green) financing, and policy making.
In practice, conclusions from the analysis of behavioural factors can always help investors avoid behavioural mistakes. Therefore, as with cognitive and emotional biases in behavioural finance, cultural biases can be specifically investigated to avoid behavioural mistakes in a process that could be called ‘defensive cultural finance applications’. Table 1 below presents a summary of practical behavioural advice for investors drawn from the findings of the current research.
Table 1: How Investors Can Avoid Mistakes in Financial Investment Decisions by Applying Findings in the Current Research
| Advice | Explanations |
| Finding 1:
Are you overlooking some important information? |
If you are a Chinese investor, have you paid too much attention to macro news and overlooked micro information, such as company fundamentals?
If you are a Western investor, have you paid too much attention to micro information and overlooked macro information? |
| Finding 2:
Check your conviction by different stock screening approach. |
If you are a Chinese investor, when you pick a stock following a top-down approach, it may be wise to see if the same stock could be picked again by following a bottom-up approach. This can help reinforce your conviction and help you avoid choosing stock on the basis of your cultural habits.
If you are a Western investor, when you pick a stock following a bottom-up approach, it may be wise to see if the same stock could be picked again by following a top-down approach. This can help reinforce your conviction and help you avoid choosing stock on the basis of your cultural habits. |
| Findings 3 & 4:
Compare short-term and long-term holdings. |
If you are a Chinese investor, when there is a reverse of trend in the financial market, try to identify the most optimistic and the most pessimistic judgements on the market and discern the reasons for the judgements before selling stock. This may help avoid a short holding tendency because of cultural habits.
If you are a Western investor, when there is a reverse of trend in the financial market, try to identify the most optimistic and the most pessimistic judgements on the market and discern the reasons for the judgements before deciding to keep holding. This may help avoid a long-holding tendency because of cultural habits. |
| Finding 5:
Understand the management team of the company you may invest in. |
If you are a Chinese investor, have you paid too much attention to the context and overlooked some general and basic criteria when evaluating the management team of the company in which you may invest?
If you are a Western investor, have you paid too much attention to the general and basic criteria and overlooked the context in which the management team are operating? |
Policymakers and commercial institutions could substantially extend the list of practical applications from the current research to promote investment in general and sustainable investment in particular. Because of cultural biases in investment decision-making process, it is possible to culturally tailor (green) investment promotion materials to meet different preferences of various international investors. In other words, government and institutions could use cultural nudging to influence investors’ investment decisions and attract them towards desired investment options. Table 2 below presents different marketing strategies for raising funds for (green) projects in China and in the West.
Table 2: Different Marketing Strategies of Raising Funds for (Green) Projects in China and in the West
| Cultural Biases in Investment Decision-Making | Marketing for (Green) Projects in China | Marketing for (Green) Projects in the West |
| Cultural Bias 1:
Chinese and Western professional investors have different attention modes |
Emphasising macroeconomic-related information, opportunities in sectors and contextual backgrounds | Focusing on projects’ specific information, with less emphasis on sectorial and contextual information |
| Cultural Bias 2:
Chinese and Western professional investors have different time orientations |
Emphasising short-term environmental, social and governance factors | Emphasising long-term environmental, social and governance factors |
Haili Wu is currently an Associate Professor of Practice in Economics at International Business School Suzhou (IBSS), Xi’an Jiaotong-Liverpool University (XJTLU), and a Fellow of the Higher Education Academy in the UK. She has obtained BA and MA in Economics at Cambridge University, Master in Law at Queen Mary College, University of London, and PhD in Psychology at University College London (UCL). In her professional life, she has earned the Chartered Financial Analyst (CFA) charter since June 2013, with over a decade’s experience working in the London financial sector and extensive experiences of consulting for governmental bodies in China and the Middle East. Haili’s academic and professional background is demonstrative of her keen interest in the value of inter-disciplinary, cross different fields (Economics/Finance in academic and practice) and cross-cultural research."
Dr Wu has accepted the invitation from the world famous publisher, Palgrave Macmillan, to write a monograph on cultural bias in investment decision making. The International Review of Financial Analysis is an SSCI Q1 journal under Elsevier. It is also a CAS (Chinese Academy of Sciences) Q1 Top Journal, an ABDC (Australian Business Deans Council) A-ranked journal, and an ABS (Association of Business Schools) 3-star journal. In the JCR (Journal Citation Reports) classification, it falls into the Q1 category in the BUSINESS, FINANCE discipline, ranking 6th out of 231 journals with a percentile of 97.6%. Furthermore, it ranks 4th globally in the field of finance.
19 Sep 2025