Transformation of investors' behavioral patterns in the context of escalating geopolitical risks

Abstract

Abstract. In the context of escalating geopolitical tensions and macroeconomic instability, classical investment concepts based on the assumption of rationality of economic agents demonstrate limited applicability. However, existing investor classifications predominantly account only for risk profile and insufficiently reflect portfolio management activity as an independent predictor of crisis success, nor do they offer an integrated approach to analyzing emotional response phases to extreme market shocks. The goal of the study is to examine the transformation of behavioral patterns of Russian investors amid escalating geopolitical instability and to identify the mechanisms through which macroeconomic shocks affect individual investment choices, considering psychological aspects. The research is based on a comprehensive approach combining quantitative analysis of empirical data from more than 50,000 retail investors provided by major Russian brokers, as well as survey results from over 15,000 investors, aggregated data from management companies, and Moscow Exchange statistics for the period 2005–2024, employing comparative and statistical analysis methods to identify relationships between trading activity, portfolio risk, and investment performance during crisis periods. The results of the study include the development of a two‑dimensional matrix of investor behavioral profiles accounting for risk appetite and portfolio management activity, systematization of emotional response phases (denial, panic, capitulation, adaptation), identification of fundamental portfolio structure transformation with the share of defensive assets rising from 25–45% to 60–85%, quantitative assessment of key cognitive biases (loss aversion — 85%, herding behavior — 60%, disposition effect — 70%), as well as evaluation of correction methods, among which decision automation demonstrated 85% effectiveness, while combined application of methods increases correction efficiency to 90%. The conclusion confirms that portfolio management activity is a more significant predictor of crisis success than initial risk tolerance, and the obtained data indicate the need to modernize investor advisory methods and create adaptive portfolio management systems that integrate psychological factors into economic analysis.