scholarly journals INVESTOR EXPERTISE AND THE RATIONALITY OF DECISION MAKING

2015 ◽  
Vol 1 (310) ◽  
Author(s):  
Marcin Rzeszutek ◽  
Monika Czerwonka ◽  
Magdalena Walczak
Keyword(s):  
Decision Making ◽  
Stock Market ◽  
Behavioral Finance ◽  
Point Of View ◽  
Decision Making Process ◽  
Exploratory Research ◽  
Behavioral Biases ◽  
Stock Market Investors

The aim of the paper is to is to explore the determinants of the rationality in decision making among polish stock market investors with different level of expertise with investing. Rationality in decision making was defined from the behavioral finance point of view and was operationalized as the frequency of some behavioral biases (see: the certainty effect) within decision making process. In particular, this study aims to investigate the degree of susceptibility the certainty effect among people of various levels of expertise with investing. As  there is still a lack of data studies in behavioral finance literature investigating the issues mentioned in this article (or existing results are ambiguous) we treated our study as an exploratory research.

scholarly journals Behavioral Biases as An Effective Factor for the Firm Financial Decision-Making: A Literature Review

2016 ◽  
Vol 10 (2) ◽  
pp. 2103-2115
Author(s):  
Bilgehan TEKIN
Keyword(s):  
Decision Making ◽  
Behavioral Finance ◽  
Point Of View ◽  
Decision Making Process ◽  
International Studies ◽  
Negative Effects ◽  
Financial Decisions ◽  
Behavioral Biases ◽  
Effective Decision Making ◽  
The Impact

Decision-making process is a multi-faceted and complex process. Decision making can be defined like a process of choosing from among a number of alternatives. It will not contribute enough to be fully understood and to effective decision making to be addressed only from the rational point of view. Behavioral finance is an integral part of the decision-making process. Individuals can improve their performance by recognizing the biases which discussed in the framework of behavioral finance. Understanding the possible negative effects of biases allows to the individuals to make better choices and they can avoid repeating the expensive errors in future. Result of investigations of behavioral biases on decision-makers in the firms, managerial bias issue has been raised. The studies show the effect of managerial biases on many financial decisions in firms. This paper investigated the role of biases such as overconfidence, loss aversion, optimism, anchoring, narrow framing, self-serving attribution, disposition effect etc. on financial decisions such as investing, financing, equity market, capital structure etc. This study review of 30 international studies related with behavioral corporate finance and behavioral biases that affect financial decisions in firms. The studies were gleaned from Web of Science and Google Scholar. The main contribution of this study to the literature is this study brings out the impact of behavioral biases on financial decisions in the firms by summarizing the previous studies. In this sense, this work also has an assembly quality. Therefore, this is also intended with this study that to transfer the knowledge and intellectual formation about the impact of behavioral bias on the financial decisions. In this paper, most important behavioral biases in the behavioral finance literature will be addressed.

Differences in Behavioral Biases in Investment Decision Making: Gender and Occupation Perspective

2015 ◽  
Vol 16 (1) ◽  
pp. 13-35
Author(s):  
Shailesh Rastogi
Keyword(s):  
Decision Making ◽  
Behavioral Finance ◽  
Investment Decision ◽  
Decision Making Process ◽  
Buying Behavior ◽  
Behavioral Biases ◽  
The People ◽  
Investment Decision Making ◽  
Behavioral Aspects ◽  
Finance Theory

Investments and Investment decision making come a long way in last few decades. The practical deviation from the established norms of conventional finance made the people know that the investors??buying behavior cannot be understood only by conventional finance theories. Studies strongly support the presence of behavioral aspects in the investment decision making process and behavioral finance provides solution to many-a-problems hitherto not answered appropriately by the conventional finance theory. Moreover, it was also propounded that the behavioral biases vary across gender and occupation of the investors. This study provides evidences for the existence of biases and also provides with the evidences that behavioral biases are not affected by the combined categories of gender and occupation.

scholarly journals THE EFFECT OF COGNITIVE AND EMOTIONAL BIASES ON THE CAPITAL STRUCTURE DECISIONS: A LITERATURE REVIEW

2014 ◽  
Vol 8 (2) ◽  
Author(s):  
Tekin Bilgehan ◽  
Gor Yusuf
Keyword(s):  
Decision Making ◽  
Capital Structure ◽  
Behavioral Finance ◽  
Point Of View ◽  
Decision Makers ◽  
Empirical Literature ◽  
Behavioral Characteristics ◽  
Strategic Choices ◽  
Emotional Process ◽  
The Capital Structure

Each decision-making process is an important cognitive and emotional process which is open to the emotional effect. Individuals make a decision about a future uncertainty either to feel good or maximizing gain by minimizing the loss ratio. Recently, researches in finance have criticized that the capital structure decisions and firms’ funding and strategic choices deviate from the traditional neoclassical paradigm. Furthermore there is a nascent empirical literature that has exposed interesting evidence of the effects of managerial behavioral biases. Managers’ decisions, that to create the capital structure, have a vital importance for the company. The behavioral finance (BF) approach may be revealed useful results in the process of solving decision-makers’ behaviors and thoughts. In this context the purpose of this study is to reveal if the managers are affected by their behavioral characteristics in the process of the financing decision-making, based on the findings of studies in the literature. From this point of view behavioral finance literature, which is about the financing and capital structure decisions, is investigated. As a result, theoretical and empirical analyses, which discussed in the literature, show that managers’ biases play an important role in explaining the capital structure choice.

scholarly journals Exploration of Silence's Motives Towards the Work Decisions: The Case of Jordanian Public and Private Schools

2019 ◽  
Vol 9 (1) ◽  
pp. 266
Author(s):  
Osama Khaled Alkhlaifat
Keyword(s):  
Decision Making ◽  
Private Schools ◽  
Human Resources Management ◽  
Point Of View ◽  
Decision Making Process ◽  
Structured Interviews ◽  
Public And Private ◽  
The Public ◽  
Work Related ◽  
Last Stage

The aim of this study has been to investigate and provide a deeper understanding of the motives of silence towards the participation in the work-related decisions, in both the public and private schools in the Jordanian capital (Amman). ‘100’ teachers were interviewed using the semi-structured interviews through the available communication means. The pre-set questions were directed to the sample of the study to identify both the situations related to the decisions and motives leading to silence and non-participation from the respondents' point of view. The motives were classified according to the factors to which they belong, as well as the situations were classified according to each stage of the decision-making process, where some specialists in the field of human resources management had been asked to help in accomplishing the classification. The results showed that the largest percentage of respondents faced at least one situation in which they chose to remain silent. Most of the situations mentioned were related to the first and last stage of decision-making process (identifying the problem and following up the decision). The results also showed that most of the motives were related to the organizational practices by the officials, where the total iteration is twice as the personal motives.

Evaluation of behavioral biases affecting investment decision making of individual equity investors by fuzzy analytic hierarchy process

2019 ◽  
Vol 12 (3) ◽  
pp. 297-314 ◽  
Author(s):  
Jinesh Jain ◽  
Nidhi Walia ◽  
Sanjay Gupta
Keyword(s):  
Decision Making ◽  
Behavioral Finance ◽  
Investment Decision ◽  
Investment Decisions ◽  
Analytic Hierarchy ◽  
Content Type ◽  
Behavioral Biases ◽  
Investment Decision Making ◽  
Overconfidence Bias ◽  
Hierarchy Process

Purpose Research in the area of behavioral finance has demonstrated that investors exhibit irrational behavior while making investment decisions. Investor behavior usually deviates from logic and reason, and consequently, investors exhibit various behavioral biases which impact their investment decisions. The purpose of this paper is to rank the behavioral biases influencing the investment decision making of individual equity investors from the state of Punjab, India. This research would provide valuable insight into the different behavioral biases to investors and other participants of the capital market and help them in improving investment decisions. Design/methodology/approach The research is conducted on the individual equity investors of Punjab, India. Fuzzy analytic hierarchy process was applied to rank the factors influencing the decision making of individual equity investors of Punjab. The primary factors considered for the study are overconfidence bias, representative bias, anchoring bias, availability bias, regret aversion bias, loss aversion bias, mental accounting bias and herding bias. Findings The three most influential criteria were herding bias, loss aversion bias and overconfidence bias. The five most influential sub-criteria were “I readily sell shares that have increased in value (C61),” “News about the company (Newspapers, TV and magazines) affects my investment decision (C84),” “I invest each element of my investment portfolio separately (C71)” and “I usually hold loosing stock for long time, expecting trend reversal (C52).” Research limitations/implications Although sample survey conducted in the present study was based on a limited sample selected from a particular area that truly represented the total population, it is considered as the limitation of this study. Practical implications The outcome of this research provides investors with a better understanding of behavioral biases that influence their decision making. This study provides them a guideline on different behavioral biases that they should consider while making investment decisions. Originality/value The research model is based on the available literature on behavioral finance and the research results and findings would add value to the existing knowledge base.

Group Decision And Negotiation In Strategic-Decision-Making

2011 ◽  
pp. 322-351
Author(s):  
Tamio Shimizu ◽  
Marley Monteiro de Carvalho ◽  
Fernando Jose Barbin
Keyword(s):  
Decision Making ◽  
Point Of View ◽  
Strategic Decision ◽  
Rational Approach ◽  
Strategic Decision Making ◽  
Decision Making Process ◽  
Great Effort ◽  
Logical Operators ◽  
Cognitive Limitations ◽  
Decision Alternatives

In the previous chapters, decisions models have been modeled based on the economic point of view of the problem expressed mainly through quantitative values and, in some cases by qualitative representation. The economic perspective draws unique coherence from economic assumptions of rational behavior and it draws predictive power from strongly valid rules of influence that employ mathematical or logical operators. Because the decision must be expressed in a way that is compatible with the rules of inference, great simplicity, and structure are required. In strategic decision making problems great effort has been directed toward relaxing the mathematical constraints, while retaining the economic — logic inference. Another important aspect to be considered is that in both theoretical and practical decision-making models, fixed numbers of decision alternatives or prefixed value of parameters have been considered. The major inputs to the analysis of an econometric model of decision-making process are subjective probabilities, utility values, and decision tree structures. Individuals may differ in their subjective value of probabilities, their utilities of outcomes or in their perceptions of the subsequent actions available. Strategic decision problems involve not only one person’s opinion but involve a group of individuals belonging to different classes and levels of interests inside and outside the organization. No longer is the problem concerned with the selection of the preferred alternative of one person. The analysis must be extended for a group of decision-makers, each one exhibiting a certain preference structure, perceiving different consequences, and corresponding to a diverse set of interest and responsibility. In some cases, depending on the number of persons involved as well as on the nature of the decision problem (for instance, promoting or hiring persons or, electing the president) it will be necessary to adopt a voting system. How can different groups of individual affect a decision-making process? In this chapter, we consider some behavioral aspects of individuals and group of individuals that may affect a decision-making process. Behavioral perspectives of competitive decision-making are neither as well articulated nor as complete as those of economic view. In behavioral views cognitive limitations and the use of mental effort are emphasized. In contrast to the rational approach of the economic frame, the behavioral views acknowledge that players may adopt different kind of rationality.

scholarly journals The Impact of the purchase channel on unplanned purchases

2019 ◽  
Vol 19 (34) ◽  
pp. 249-268
Author(s):  
Inês Henriques ◽  
Ana Margarida Barreto
Keyword(s):  
Decision Making ◽  
Online Shopping ◽  
Online Advertising ◽  
Future Research ◽  
Decision Making Process ◽  
Exploratory Research ◽  
Shopping List ◽  
Purchase Situation ◽  
The Impact ◽  
Web Designers

This exploratory research aimed to observe if the purchase channel used (online versus physical store) could influence the number and the type of unplanned purchases in a supermarket purchase situation. 64 participants were asked to simulate a supermarket purchase using a shopping list and a predefined budget. Participants were divided into two conditions: online shopping and physical store shopping simulation.Findings show that consumers purchase more unplanned items (and spent more money on unplanned purchases) when they buy in physical stores, as well as items on promotion. They also tend to spend more time in the decision-making process when compared to participants shopping online. In addition, online consumers spend more money on items that were on their shopping list.Our findings are important to the literature, demonstrating that consumer reactions towards shopping differ according to the channel. Advertisers and web designers can also benefit from these findings by making better decisions regarding online advertising, specifically in the retail domain. Suggestions for future research are provided in the end.

scholarly journals GROUP BEHAVIORAL BIASES AFFECT FINANCIAL DECISIONS UNLIKE INDIVIDUAL BEHAVIORAL BIASES

2020 ◽  
Vol 15 (1) ◽  
Author(s):  
Marcelo Henriques de Brito ◽  
Paula Esteban do Valle Jardim
Keyword(s):  
Decision Making ◽  
Group Dynamics ◽  
Behavioral Finance ◽  
Institutional Investors ◽  
Group Behavior ◽  
Individual Investors ◽  
Cognitive Errors ◽  
Financial Decisions ◽  
Behavioral Biases ◽  
Group Members

This work presents a new approach to behavioral finance with a theoretical contribution by suggesting and discussing with examples a list of group behavioral biases along with established individual behavioral biases, bringing, hence, an additional outlook on how behavioral biases affect financial decisions. While individual behavioral biases are detected in individuals acting alone, group behavioral biases require the scrutiny of group behavior. This awareness may be particularly important to institutional investors, whose decisions basically stem from a committee or a group that will exhibit behavioral biases depending on how the group members interact between themselves when making a decision, which may include negotiation activities and not necessarily be related to personality or hierarchy. The focus on individual investors deciding on personal investments explain the need of work already developed in behavioral finance, which focus on individual behavioral biases, which may be a consequence from either cognitive errors or emotional biases. However, decisions from institutional investors basically stem from a committee or a group that will exhibit behavioral biases depending on how the group members interact between themselves when making a decision. To address the challenge of identifying causes and consequences for unexpected or unsuitable financial decision-making within a group, this work initially retrieves previous work on individual behavioral biases, linking emotional biases and cognitive errors to the “system 1” and “system 2” decision-making framework. Then, a conceptual contribution of this paper, which may be particularly relevant for institutional investors, is to explain with examples - after research and experience - which are the group behavioral biases and their impact upon financial decisions. Individual behavioral biases already acknowledged in other works on behavioral finance are contrasted in this work to the suggested group behavioral biases. Furthermore, this work suggests that there are two broad types of group behavioral biases: group dynamics biases and information-acceptance biases. Each broad type is subdivided into biases related to the structure of the group and biases related to how the group decision-making procedure occurs. Group dynamics biases related to the manner the group is structured are the following: kin bias (belonging bias), harmony bias, and competition bias. On the other hand, group dynamics biases may be sorted according to five different decision-making procedures, namely: herding, fad bias, Plato bias (denial bias), scarcity bias, and home bias.

scholarly journals The actor's point of view in terms of governance tendency to the health tourism: The case of AntalyaYönetişim eğilimleri çerçevesinde sağlık turizmine aktörlerin bakış açısı: Antalya örneği

2016 ◽  
Vol 13 (2) ◽  
pp. 2885
Author(s):  
Zişan Korkmaz Özcan
Keyword(s):  
Decision Making ◽  
Private Sector ◽  
The State ◽  
Point Of View ◽  
Survey Study ◽  
Decision Making Process ◽  
Private Institutions ◽  
Health Tourism ◽  
Governmental Organizations ◽  
Non Governmental Organizations

Governence which means that governing structures act in unision instead of acting seperately is also very significant in the field of health. In this regard, governence approach aims at accomplishing the sense of simultaneous governing corresponding with creating policies and decision-making process by ensuring the participation not only the state but also citizens,private sector and non-governmental organizations (NGOS)  as important factors of change.This study aims at assessing whether deficiency in relation with the health tourism in Turkey relates to the governence or not. For that purpose, Antalya that is one of the most important provinces of Turkish tourism has been chosen as a range of application and magnitude of governence of Antalya in the field of health has been tried to be measured by carrying out survey study consisted of public-private institutions and organizations, and the authorities of non-governmental organizations with the over 106 people.According to the results of the suvey, there is a lack of governence in the field of health tourism in Antalya, and this endangers the potential of health tourism. So, being collaborated an advertisement, information and application activity in harmony on the health tourism, and being established public politicy are an important acqusition for both the country and Antalya in terms of economic, political, social and cultural. ÖzetYönetim yapılarının tek başlarına hareket etmeleri yerine, birlikte hareket etmeleri anlamına gelen yönetişim, sağlık turizmi alanında da önemli bir yer tutmaktadır. Bu bağlamda yönetişim yaklaşımı, politika oluşturma ve karar verme süreçlerine değişimin önemli aktörleri olarak sadece devletin değil; yurttaşların, özel sektör ve Sivil Toplum Kuruluşları (STK)'nın da katılımını sağlayarak birlikte yönetim anlayışını hayata ge­çirmeyi amaçlamaktadır. Bu çalışmanın amacı, Türkiye'nin sağlık turizminde eksikliğinin yönetişim olup olmadığını belirleyebilmektir. Bu amaçla, Türk turizminin en önemli illerinden biri olan Antalya, uygulama bölgesi olarak seçilmiş ve kamu-özel sektör kurum ve kuruluşları ile STK'nın yetkili kişilerinden oluşan 106 kişi üzerinde yüzyüze yapılan anket çalışması yöntemiyle Antalya bölgesinin sağlık turizmi alanında yönetişim boyutu ölçülmeye çalışılmıştır. Anket çalışmasının sonuçlarına göre, Antalya’da sağlık turizmi alanında yönetişim eksikliği vardır ve bu eksiklik sağlık turizmi potansiyelini tehdit eder sonucuna ulaşılmıştır. Bu bağlamda sağlık turizmi alanında yapılacak olan tanıtım, bilgilendirme ve uygulama faaliyetlerinin işbirliği içerisinde yapılması, kamu politikalarının da bu çerçevede oluşturulması hem ülkemiz, hem de Antalya ili açısından ekonomik, siyasal, sosyal ve kültürel anlamda önemli bir kazanç olacaktır.

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