Developing an instrument for measuring the effects of heuristics on investment decisions

Kybernetes ◽  
2016 ◽  
Vol 45 (7) ◽  
pp. 1052-1071 ◽  
Author(s):  
Kadir C. Yalcin ◽  
Ekrem Tatoglu ◽  
Selim Zaim
Keyword(s):  
Behavioral Finance ◽  
Investment Decisions ◽  
Small Sample ◽  
Equation Modeling ◽  
Individual Investors ◽  
Moderating Effects ◽  
Measurement Scales ◽  
Content Type ◽  
The Usa ◽  
The Impact

Purpose Based on a thorough review and synthesis of the literature in behavioral finance, the purpose of this paper is to develop three measures of heuristics that tend to influence investment decisions of individual investors. Design/methodology/approach Using perceptual data collected from a sample of 167 individual investors in the USA, the reliability and validity of heuristics measures are assessed by confirmatory factor analysis with structural equation modeling. Then, the second-order model is executed in order to indicate the paths among the study’s constructs. Finally, a multiple-group analysis is conducted to analyze the moderating effects of demographic factors on the relationship between the perceived level of heuristics and their constituent dimensions. Findings Of the three groups of heuristics, salience is found to be the most important followed by mental accounting, while representativeness features as relatively less important. Regarding the moderating effects, only investment experience is noted to have a significant moderating impact. Research limitations/implications The data utilized for testing and validating this instrument was acquired from a relatively small sample of individual investors in the USA, which makes the generalization of findings somewhat limited. Practical implications Both researchers and practitioners in behavioral finance can use these measurement scales to better understand the impact of heuristics on individual investment decisions and also to develop models that relate the critical factors of heuristics to the performance of individual investment decisions. Originality/value To date, there has been no systematic attempt in the extant behavioral finance literature to develop a valid and reliable instrument on heuristics which would aid to improve the quality of decision making in investment analysis.

Does salience matter in investment decision?

Kybernetes ◽  
2019 ◽  
Vol 48 (8) ◽  
pp. 1894-1912
Author(s):  
Samra Chaudary
Keyword(s):  
Investment Decision ◽  
Investment Decisions ◽  
Equation Modeling ◽  
Individual Investors ◽  
Short Term ◽  
Content Type ◽  
Multigroup Analysis ◽  
Money Managers ◽  
The Impact

Purpose The paper takes a behavioral approach by making use of the prospect theory to unveil the impact of salience on short-term and long-term investment decisions. This paper aims to investigate the group differences for two types of investors’ groups, i.e. individual investors and professional investors. Design/methodology/approach The study uses partial least square-based structural equation modeling technique, measurement invariance test and multigroup analysis test on a unique data set of 277 active equity traders which included professional money managers and individual investors. Findings Results showed that salience has a significant positive impact on both short-term and long-term investment decisions. The impact was almost 1.5 times higher for long-term investment decision as compared to short-term decision. Furthermore, multigroup analysis revealed that the two groups (individual investors and professional investors) were statistically significantly different from each other. Research limitations/implications The study has implications for financial regulators, money managers and individual investors as it was found that individual investors suffer more with salience heuristic and may end up with sub-optimal portfolios due to inefficient diversification. Thus, investors should be cautious in fully relying on salience and avoid such bias to improve investment returns. Practical implications The study concludes with a discussion of policy and regulatory implications on how to minimize salience bias to achieve optimum and diversified portfolios. Originality/value The study has significantly contributed to the growing body of applied behavioral research in the discipline of finance.

Examining investors' sentiments, behavioral biases and investment decisions during COVID-19 in the emerging stock market: a case of Pakistan stock market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shagufta Parveen ◽  
Zoya Wajid Satti ◽  
Qazi Abdul Subhan ◽  
Nishat Riaz ◽  
Samreen Fahim Baber ◽  
...  
Keyword(s):  
Developing Countries ◽  
Stock Market ◽  
Behavioral Finance ◽  
Stock Markets ◽  
Investment Decisions ◽  
Equation Modeling ◽  
Disposition Effect ◽  
Content Type ◽  
Behavioral Biases ◽  
The Impact

PurposeThis study investigates the impact of the COVID-19 pandemic on investors' sentiments, behavioral biases and investment decisions in the Pakistan Stock Exchange (PSX).Design/methodology/approachThe authors have assessed investors' behaviors and sentiments and the stock market overreaction during COVID-19 using a questionnaire and collected data from 401 investors trading in the PSX.FindingsResults of structural equation modeling revealed that the COVID-19 pandemic affected investors' behaviors, investment decisions and trade volume. It created feelings of fear and uncertainty among market participants. Evidence suggests that behavioral heuristics and biases, including representative heuristic, anchoring heuristic, overconfidence bias and disposition effect, negatively influenced investors' decisions at the PSX.Research limitations/implicationsThis study will contribute to behavioral finance literature in the context of developing countries as it has revealed the impact of COVID-19 on the emerging stock market, and its results are generalizable to other emerging stock markets.Practical implicationsThe findings of this study will help academicians, researchers and policymakers of developing countries. Academicians can formulate new behavioral models that can depict the solutions of dealing with an uncertain situation like COVID-19. Policymakers like the Securities Exchange Commission and the PSX can formulate crisis management strategies based on behavioral finance concepts to cope with situations like COVID-19 in the future and help lessen investors' losses in the stock markets. The role of the Securities Exchange Commission is crucial as it regulates the financial markets. It can arrange workshops to educate investors to manage their decisions during crisis time and focus on the best use of irrational and rational decision-making at the same time using Lo (2004) adaptive market hypothesis.Originality/valueThe novelty of the paper is that the authors have introduced overconfidence and disposition effect as mediators that create a connection between representative and anchoring heuristics and investment decisions using primary data collected from investors (institutional and retail) to demonstrate the presence of psychological biases during COVID-19, and it has been done for the first time according to authors' knowledge. It is a contribution and addition to the behavioral finance literature in the context of developing countries' stock markets and their efficiency.

The role of elaboration likelihood routes in relationships between user-generated content and willingness to pay more

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bekir Bora Dedeoğlu ◽  
Anil Bilgihan ◽  
Ben Haobin Ye ◽  
Yajun Wang ◽  
Fevzi Okumus
Keyword(s):  
Decision Making ◽  
Social Media ◽  
Willingness To Pay ◽  
Structural Equation ◽  
Group Analysis ◽  
Equation Modeling ◽  
Moderating Effects ◽  
Content Type ◽  
Central Route ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of social media sharing on tourists’ willingness to pay more (WPM) at destinations. The moderating effects of tourists’ preferred route in decision-making or obtaining information (i.e. central or peripheral routes) were also examined. Design/methodology/approach A theoretical model was developed and tested using partial least squares structural equation modeling (PLS-SEM). Moderating effects of central and peripheral routes were tested using PLS multi-group analysis. Data were collected from 478 tourists in Antalya, Turkey, a sea, sun and sand tourist destination. Findings Findings indicate that importance attached to participant sharing (IPS) and importance attached to non-participant sharing (INPS) are significant antecedents of tourists’ WPM intentions. Moderating effects of tourists’ preferred route in decision-making reveal that the effect of IPS on WPM intention is more influential for those with high central route preferences than those with low central route preferences. While the effects of INPS and IPS on WPM intention is more determinative for those with higher peripheral route preferences. Practical implications Although it is known by the practitioners that consumer-generated contents are important, this research suggests and supports that these contents trigger tourists to pay higher prices. Originality/value How WPM is motivated by others’ social media sharing was not very clear in the literature. Therefore, this research gap was addressed in part by examining the social media sharing structure in terms of whether others posted on organization-related sites or on personal sites.

A study of prominence for disposition effect: a systematic review

2019 ◽  
Vol 11 (1) ◽  
pp. 2-21 ◽  
Author(s):  
Syed Aliya Zahera ◽  
Rohit Bansal
Keyword(s):  
Mutual Funds ◽  
Behavioral Finance ◽  
Mutual Fund ◽  
Institutional Investors ◽  
Disposition Effect ◽  
Individual Investors ◽  
Content Type ◽  
Experimental Market ◽  
The Individual ◽  
The Impact

Purpose The purpose of this paper is to study the disposition effect that is exhibited by the investors through the review of research articles in the area of behavioral finance. When the investors are hesitant to realize the losses and quick to realize the gains, this phenomenon is known as the disposition effect. This paper explains various theories, which have been evolved over the years that has explained the phenomenon of disposition effect. It includes the behavior of individual investors, institutional investors and mutual fund managers. Design/methodology/approach The authors have used the existing literatures from the various authors, who have studied the disposition effect in either real market or the experimental market. This paper includes literature over a period of 40 years, that is, Dyl, 1977, in the form of tax loss selling, to the most recent paper, Surya et al. (2017). Some authors have used the PGR-PLR ratio for calculating the disposition effect in their study. However, some authors have used t-test, ANNOVA, Correlation coefficient, Standard deviation, Regression, etc., as a tool to find the presence of disposition effect. Findings The effect of disposition can be changed for different types of individual investors, institutional investors and mutual funds. The individual investors are largely prone to the disposition effect and the demographic variables like age, gender, experience, investor sophistication also impact the occurrence of the disposition effect. On the other side, the institutional investors and mutual funds managers may or may not be affected by the disposition effect. Practical implications The skilled understanding of the disposition effect will help the investors, financial institutions and policy-makers to reduce the adverse effect of this bias in the stock market. This paper contributes a detailed explanation of disposition effect and its impacts on the investors. The study of disposition effect has been found to be insufficient in the context of Indian capital market. Social implications The investors and society at large can gains insights about causes and influences of disposition effect which will be helpful to create sound investment decisions. Originality/value This paper has complied the 11 causes for the occurrence of disposition effect that are found by the different authors. The paper also highlights the impact of the disposition effect in the decision-making of various investors.

The impact of brand associations on brand loyalty in the football industry

2016 ◽  
Vol 6 (5) ◽  
pp. 499-519 ◽  
Author(s):  
Daniel Maderer ◽  
Dirk Holtbruegge ◽  
Rachel Woodland
Keyword(s):  
Brand Loyalty ◽  
Structural Equation ◽  
Brand Management ◽  
Negative Impact ◽  
Equation Modeling ◽  
Brand Associations ◽  
Content Type ◽  
Attitudinal Loyalty ◽  
The Usa ◽  
The Impact

Purpose The purpose of this paper is to explore the impact of brand associations on brand loyalty of fans toward professional football clubs in developed and emerging football markets (EFM). In particular, the following research questions are answered: how important are different determinants of brand associations for fans from developed football markets (DFM) and EFM? Are there any major differences in the importance of different brand associations and their influence on brand loyalty between fans from DFM and EFM? Design/methodology/approach Based on the customer-based brand equity framework the impact of brand associations on brand loyalty is tested with a sample of 3,587 fans from DFM – Germany, England, Spain, Italy, and France (2,032) – as well as fans from EFM – Brazil, Russia, India, China, and the USA (1,555). Findings Structural equation modeling is applied and shows a negative impact of brand attributes on attitudinal loyalty, whereas brand benefits positively impact attitudinal loyalty. Furthermore, significant differences between fans from developed and EFM are revealed. Implications for the management of football teams and for research on brand management are derived. Originality/value This study extends the work of Gladden and Funk (2001) by expanding the model used to assess brand loyalty and analyzes it empirically in different football markets. When looking to foster attitudinal loyalty, marketers should concentrate on benefit associations instead of attribute associations. Most importantly, marketers should be aware that when focusing on developing brand loyalty amongst EFM fans, they should not simply apply the same strategies that proved to be effective in DFM and vice versa.

The impact of RFID, IIoT, and Blockchain technologies on supply chain transparency

2019 ◽  
Vol 31 (3) ◽  
pp. 441-457 ◽  
Author(s):  
Pamela J. Zelbst ◽  
Kenneth W. Green ◽  
Victor E. Sower ◽  
Philip L. Bond
Keyword(s):  
Supply Chain ◽  
Radio Frequency Identification ◽  
Equation Modeling ◽  
Rfid Technology ◽  
Measurement Scales ◽  
Technology Utilization ◽  
Content Type ◽  
Blockchain Technology ◽  
Combined Impact ◽  
The Impact

Purpose The purpose of this paper is to assess the combined impact of radio frequency identification (RFID), Industrial Internet of Things (IIoT) and Blockchain technologies on supply chain transparency (SCT). Design/methodology/approach Data from 211 US manufacturing managers is analyzed using a covariance-based structural equation modeling methodology. Findings The structural model fits the data relatively well. RFID technology directly and positively impact both IIoT and Blockchain technologies which, in turn, directly and positively impact SCT. RFID technology indirectly affects SCT through both IIoT technology and Blockchain technology. Research limitations/implications This study is the first to empirically assess the impact of RFID, IIoT and Blockchain technologies on SCT. First-wave empirical studies must be replicated to support generalization of the findings. Practical implications This study provides empirical evidence to support the implementation of a combination of RFID, IIoT and Blockchain technologies as infrastructure necessary to achieve end-to-end SCT. Originality/value New measurement scales for IIoT technology utilization and Blockchain technology utilization are developed and assessed for validity and reliability. This is the first study to assess the combined impact of RFID, IIoT and Blockchain technologies on SCT.

Perceived credibility of online hotel reviews and its impact on hotel booking intentions

2019 ◽  
Vol 31 (9) ◽  
pp. 3465-3483 ◽  
Author(s):  
Uttam Chakraborty
Keyword(s):  
Structural Equation ◽  
Positive Impact ◽  
Online Reviews ◽  
Equation Modeling ◽  
Measurement Scales ◽  
Content Type ◽  
Perceived Credibility ◽  
Booking Intentions ◽  
Hotel Booking ◽  
The Impact

Purpose This study aims to evaluate the vitality of source, receiver and message factors on credibility assessment of online hotel reviews. Further, the current study determines the effects of perceived credibility of online reviews (PCOR) on hotel booking intentions (HBI). Design/methodology/approach The current study performs reliability analysis to determine the internal consistency of the measurement scales and to ensure the uni-dimensionality of the measurement scales the present study performs exploratory factor analysis. Further, the present study performs structural equation modeling to identify the relationships between the variables. Findings Two-sided online reviews have a more significant positive impact on PCOR as compared to the effects of receiver, review quality, review consistency and negative-sided online reviews. Originality/value This is one of the first study that analyses the impact of source, receiver and message on PCOR. Moreover, the present study offered theoretical justification behind the factors that affect the authenticity of online hotel reviews and its effects on HBI.

The role of customer familiarity in evaluating green servicescape: an investigation in the coffee shop context

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yoon Jung Jang
Keyword(s):  
Place Attachment ◽  
Structural Equation ◽  
Behavioral Outcomes ◽  
Critical Issue ◽  
Equation Modeling ◽  
Coffee Shop ◽  
Content Type ◽  
Service Environment ◽  
The Usa ◽  
The Impact

Purpose This study aims to examine the impact of green atmospheric and communicative servicescape dimensions on customers’ emotional and behavioral outcomes and explores the moderating effect of customer familiarity. Design/methodology/approach Data were collected from coffee shop customers in the USA. Structural equation modeling and a multigroup analysis were used for analysis. Findings The findings indicated that the atmospheric dimensions of green coffee shops have a greater impact than communicative dimensions on customers’ green place attachment and loyalty. However, the effects of green servicescape depend on customer familiarity. The impact of the communicative servicescape on customers’ attachment and loyalty is significantly greater in a high-familiarity group than in a low-familiarity group. Practical implications The findings provide coffee shop managers with insights into effective design of a green service environment. Although managers focus on both dimensions, they may use customer familiarity as a segmenting or targeting tool in designing the green service environment and developing a sustained relationship with customers with different levels of familiarity. Originality/value This study extends the existing servicescape models by incorporating green place attachment as a construct to comprehend customers’ inner evaluations. It also contributes to the literature on attachment by demonstrating the clear linkage between both green servicescape dimensions and place attachment. This study highlights customer familiarity construct that should be a critical issue in advancing the understanding of customer behavior in the green servicescape context.

The effect of brand authenticity on consumer–brand relationships

2019 ◽  
Vol 28 (2) ◽  
pp. 231-241 ◽  
Author(s):  
Hyunjoo Oh ◽  
Paulo Henrique Muller Prado ◽  
Jose Carlos Korelo ◽  
Francielle Frizzo
Keyword(s):  
Behavioral Intentions ◽  
Structural Equation ◽  
The Self ◽  
Equation Modeling ◽  
Content Type ◽  
Brand Authenticity ◽  
Key Factor ◽  
The Usa ◽  
The Impact ◽  
The Relationship

Purpose This paper aims to explore the impact of brand authenticity on forming self-reinforcing assets (enticing-the-self, enriching-the-self and enabling-the-self), which subsequently influence the brand-self connectedness and consumers’ behavioral intentions. Design/methodology/approach The authors surveyed 347 consumers in the USA and Brazil and used structural equation modeling to test the relationship among brand authenticity, self-reinforcing assets, brand-self connectedness and behavioral intentions. Findings Brand authenticity was found to influence the self-reinforcing assets. In turn, the self-reinforcing assets promoted closeness toward the brand, thereby increasing the behavioral intentions of consumers to buy a product, visit a store/website in the future and recommend the brand to other people. Practical implications Marketing practitioners can use these results to promote better brand positioning by considering brand authenticity as a key factor in how consumers cognitively assess brands. Originality/value This paper shows that brand authenticity is a key antecedent of consumer–brand self-reinforcing assets.

The influence of Islamic attributes on tourist satisfaction with pull motivation as an intervening variables

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hilda Monoarfa ◽  
Agus Rahayu ◽  
Fitranty Adirestuty ◽  
Rizuwan Abu Karim ◽  
Azlin Zanariah Bahtar ◽  
...  
Keyword(s):  
Structural Equation ◽  
Quantitative Methods ◽  
Small Sample ◽  
Partial Least Square ◽  
Least Square ◽  
Equation Modeling ◽  
Content Type ◽  
Tourist Attractions ◽  
Tourist Satisfaction ◽  
The Impact

Purpose The purpose of this study is to find out the level of influence of Islamic attributes and pull motivation to the satisfaction of Muslim tourists visiting Indonesia. Furthermore, this study may reveal where variables have a strong influence on the variable satisfaction of Muslim tourists. In addition, this study also wanted to know if Islamic attributes can influence the satisfaction of Muslim tourists with pull motivation as a moderating variable. Design/methodology/approach Using quantitative methods, this study analyzed the results of questionnaires that have been distributed to 200 Muslim tourist respondents who have visited Indonesia. To declare the hypotheses, the collected data were analyzed with structural equation modeling-partial least square using SmartPLS application version 3.2.7. Findings From this study, it was discovered that pull motivation has more effect on the satisfaction of Muslim tourists visiting Indonesia. Other results showed that both Islamic attributes and pull motivation simultaneously affect the satisfaction of Muslim tourists. Furthermore, Islamic attributes can affect pull motivation and pull motivation can also become an intermediary variable in bridging the impact of Islamic attributes on the satisfaction of Muslim tourists. Research limitations/implications The limitations of this study include the relatively small sample used and not yet taking foreign tourists as respondents. Besides that, you can also add several variables to complement this research in the future either as an intervening variable or a mediator variable. Practical implications To increase the satisfaction of Muslim tourists traveling to Indonesia, policymakers in Indonesia must further improve the facilities of the pull motivation aspect such as the cleanliness of tourist attractions, exotic locations and hygienic shopping centers. In addition, aspects of Islamic attributes must also be updated, such as aspects of adequate worship facilities and tourist attractions that apply the concept of halal for Muslims. Originality/value The originality of this study on the pull motivation variable as an intervening variable and adding the Islamic attribute variable in the case of Muslim tourist satisfaction.

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