When talking about various nations, since it is one of the primary features that makes a nation special, one must always keep their culture in mind. Some of the differentiators that set the culture of one nation apart from another are racial make-up, social behaviors, language, religion, health, and education systems. Each of these elements plays a specific role in people’s actions within that community, helping them make choices about their food, job, fashion, as well as their approach to investment.
The attitude of an investor to risk is generally related to their income, job security, and inflation. Taking this into account, you might assume that if their economic condition is the same, two individuals from completely different cultures and countries would invest similarly. And you’d be right. Within societies and individual families, the entire idea of investment begins, founded on the basis of the social expectations that surround them and constitute the structure of their community.
A research by behavioral finance professors Mei Wang and Marc Oliver Rieger shows that cultural history, even when inflation rates and income are taken into account, affects investment behaviour.
The more anxious investors are according to Wang and Rieger, the greater the value premium in a country is. Such countries are Russia and Romania, for instance. Anglo-Saxons are prepared to pay more for equity investments. Traditionally, certain cultures, which is expressed in the make-up of the overall economy, appear to be more risk averse than others. “Ego-traders” are typically based in the U.S. In Germany and the Nordics, where there are more value traders who tend to wait for more substantial returns, more patients live.
The perceptions of people and the concept of meaning or value development have altered over time. Culturally, however many cultures still prefer conventional investment tools as a means of preserving or producing capital.
The one that occurs with gold is the most historical of all the emotional relations between cultures and particular asset groups. Over the last decade, demand for gold trade has shifted east, mainly because of the cultural affinity that exists between precious metals and countries such as India and China, where gold is considered one of the safest value stores.
There is a lot of capital trapped in hard assets in India because that is the conventional and cultural attitude of society there. Whether traded as physical gold or as a CFD (contract for difference) on the precious metal, the culturally established beliefs in the nation drive high demand for gold as an asset class. In China, this cultural preference for gold is similar as well. It is instrumental in the Lunar New Year, and for its symbolism and centuries-old meaning, 24-carat jewelry featuring the zodiac sign is often given as gifts.
An additional emotional factor affecting the investment is superstition. On Friday the 13th, stock market returns are always lower in the Western world. In East Asian cultures, mostly China, a similar situation can be found with the number four. On the fourth day of each month, investors avoid all kinds of trades.
According to individual societies, the coronavirus pandemic has already worked out differently around the world. Most investors worldwide have responded by dramatically increasing their trading operation, not least because most individuals have been quarantined for months at home, with more time on their hands to trade.