Rethinking Behavioral Biases: Cognitive vs Contextual Heuristics Through Mediating Role of Risk Perception in China’s Stock Market

This study examines whether cognitive heuristics (overconfidence and anchoring) and contextual heuristics (herding and availability) influence individual investors’ decision-making in China’s stock market through risk perception. Using survey data from 398 individual investors and structural equation modelling, the results show that risk perception partially mediates the effects of cognitive heuristics but fully mediates those of contextual heuristics. Importantly, the contribution lies not in confirming mediation per se, but in demonstrating distinct psychological pathways through which different heuristic categories influence investment decision-making. This dual-pathway mechanism suggests that contextual heuristics rely more heavily on external information environments, whereas cognitive heuristics operate through both direct judgment shortcuts and perceived risk. The findings extend behavioral finance research by integrating heuristic classification with risk perception and providing evidence from an emerging market. These insights have implications for investor education and policy design, particularly in AI-driven information environments where behavioral biases and risk perception may be amplified.