scholarly journals The effect of financial literacy on behavioral biases of individual investors in the Egyptian stock exchange

2021 ◽  
Vol 5 (2, special issue) ◽  
pp. 120-134
Author(s):  
Amr Youssef ◽  
Passent Tantawi ◽  
Mohamed Ragheb ◽  
Mohammad Saeed

The purpose of this paper is to examine how the dimensions of financial literacy could affect the behavioral biases of individual investors in the Egyptian stock exchange. The study examines the data collected from 403 individual investors in Egypt. The findings revealed the presence of some kinds of behavioral biases among individual investors in the Egyptian stock exchange, which could be categorized into three main categories: belief perseverance biases, information processing biases, and emotional biases (Pompian, 2012). This supports the view that individual investors do not necessarily act rationally. The findings also support the general view that financial literacy has a negative effect on behavioral biases; however, the effect differs between the categories of the behavioral biases, with the most effect on information processing biases, moderate effect on belief perseverance biases, and low effect on emotional biases. Also, this study indicated that the impact of financial literacy on behavioral biases is greater on females than males (Baker, Kumar, Goyal, & Gaur, 2019). Financial intermediaries and consultants can possibly become more effective by understanding the decision-making processes of individual investors. This study adds to the limited academic research that attempted to tackle the impact of financial literacy on the categories of behavioral biases

2019 ◽  
Vol 10 (4) ◽  
pp. 55 ◽  
Author(s):  
Geetika Madaan ◽  
Sanjeet Singh

Individual investor’s behavior is extensively influenced by various biases that highlighted in the growing discipline of behavior finance. Therefore, this study is also one of another effort to assess the impact of behavioral biases in investment decision-making in National Stock Exchange. A questionnaire is designed and through survey responses collected from 243 investors. The present research has applied inferential statistics and descriptive statistics. In the existing study, four behavioral biases have been reviewed namely, overconfidence, anchoring, disposition effect and herding behavior. The results show that overconfidence and herding bias have significant positive impact on investment decision. Overall results conclude that individual investors have limited knowledge and more prone towards making psychological errors. The findings of the study also indicate the existence of these four behavioral biases on individual investment decisions. This study will be helpful to financial intermediaries to advice their clients. Further, study can be elaborated to study other behavioral biases on investment decisions.


2019 ◽  
Vol 06 (03) ◽  
pp. 1950020
Author(s):  
Naveeda K. Katper ◽  
Muhammad Azam ◽  
Nazima Abdul Karim ◽  
Syeda Zinnaira Zia

The purpose of this study is to investigate the impact of behavioral biases on investment decision, and the interaction effect of socio-demographic characteristics. Data were collected from a sample of 179 individual investors in the Pakistan Stock Exchange (PSX). The authors conducted a hierarchical regression analysis to test the moderating effect of socio-demographic variables on behavioral biases. The results show that behavioral biases have a significant impact on investors’ decision-making. Moreover, socio-demographic variables (education, occupation and marital status) moderate the relationship between emotional biases and investors’ decision-making. This study provides a new addition to prior literature by investigating the impact of behavioral biases on investors’ decision-making, and the interaction effect of socio-demographic characteristics.


Author(s):  
Nermin M. Gohar

This research intends to fill the gap in the literature by studying the impact of lagged real advertising expenditures on different perspectives of brand equity in the Egyptian context, which are: Firm-based and Market-based brand equity. The research follows the quantitative research-based approach, with the descriptive explanatory method. Secondary data was collected from firms’ financial reports of sixteen sectors for the period 2013 - 2020 to consider the effect of real advertising expenditures on firm-based and market-based brand equity models. Data was collected from 168 listed companies in the Egyptian stock exchange market, after deleting the financial institutions. The unit of analysis was the corporate brands and data collected was panel data analyzed using Eviews program – version 10, using GLS regression. Results showed that market risk significantly moderates the relationship between advertising expenditures and Firm-based and Market-based brand equity.


2020 ◽  
Vol 14 (1) ◽  
pp. 35-47
Author(s):  
Saloni Raheja ◽  
Babli Dhiman

Purpose In earlier studies, research has shown that EI is the only element, which influences the ways in which people develop in their lives, jobs and social skills control their emotions and get along with other people. It is EI that dictates the way people deal with one another and understand emotions. The research gap is to explore the impact of behavioral factors and investors psychology on their investment decision-making. Design/methodology/approach The information was gathered from 500 financial specialists. The region of research was the financial specialists who contribute through LSC Securities Ltd. in Punjab State. The purposive testing system was used in this examination. Findings The investigation found that the positive connection between the conduct predispositions of the financial specialists and venture choices of the speculators and positive connection between enthusiastic insight of the financial specialists and their venture choices. Yet, the authors found that the enthusiastic insight better foresees the venture choices of the financial specialists than the conduct predispositions of the speculators. Among the different elements of conduct inclinations of the speculator’s lament and carelessness are identified with the financial specialist’s venture choices. Among the various estimations of eager understanding – care, dealing with emotions, motivation, empathy and social aptitudes are related to the hypothesis decisions of the monetary pros. Research limitations/implications The sample selection was based on purposive sampling, rather than a random probability sample. The sample was area specific, restricted only to Ludhiana Stock Exchange in Punjab state. Therefore, the results of the study cannot be generalized with certainty to all the investors investing through other exchanges in other states. The inferences are based on the assumption that the data provided by the investors are true and correct. The findings may be relevant for other stock exchanges as that of the Ludhiana Stock Exchange. However, the authors do not claim the generalization of the results. Practical implications This study also helps to understand the relationship between investment decision-making and risk tolerance of investors. It will helpful for the financial advisors to know the behavioral biases of investors while making an investment decision, and therefore, they can advise investors properly to mitigate such biases. It may help the investors in understanding the subjective part of their behavior and control their emotions while taking decisions for their investment in stock market options. Social implications This research will help investment advisors and finance professionals to judge investors’ attitudes toward risk in a better way, which leads to better investment decisions. Originality/value This study is my own study and it is original and has not been published anywhere.


2019 ◽  
Vol 5 (4) ◽  
pp. p404
Author(s):  
Maen Yousef Khalaf Hijazin ◽  
Dr. Saeed Mikhled Ahmad Al-naimat

This study aims at identifying the extent to which IAS 34 (Interim financial reporting) is applied in the Jordanian public shareholding companies, along with highlighting the impact of its application on individual investors at these companies. Study population consists of all Jordanian public shareholding industrial companies (45 companies) listed at Amman Stock Exchange. Due to the large number of the study population, preparers of financial statements (employees of companies), and individual investors, we have selected a simple random sample. The total number of preparers of financial statements (employees), and individual investors were (500) individuals who were selected for the sample. The results showed that all companies are committed to issue and publish interim financial reports within the period specified for that purpose. There is a statistically significant relationship between the variables relevant to the company including (the firm's nature, profitability, and age) and the compliance with issuing the reports and the information content of the financial statements. Moreover there are statistically significant differences in the extent to which IAS 34 is applied in the Jordanian public shareholding companies. These differences arise due to the personal and occupational characteristics of the preparers of financial statements (gender, age, qualification, position, and experience).


2014 ◽  
Vol 02 (02) ◽  
pp. 12-20
Author(s):  
Sahar Parvez ◽  

This research paper examines the impact of emotional intelligence and financial literacy on investment decision with a mediating role of risk perception. The data is collected by using questionnaire, from a sample of 152 investors, from stock exchange and banks. The results support that to make adequate investment decisions, investors should be financially literate and have control on their emotions. However, risk perception of investors does not mediate this relationship.


2020 ◽  
Vol 11 (2) ◽  
pp. 19-37
Author(s):  
Mustafa Hussein Abd-Alla ◽  
Mahmoud Sobh

We test the impact of herding behaviour on the risk pricing in the Egyptian Stock Exchange (EGX) by adding an additional risk factor reflecting herding behaviour to the Fama and French three-factor model. We construct a portfolio to mimic an additional risk factor related to herding behaviour, in addition to the original risk factors in the Fama and French three-factor model. The three-factor model will be tested in its original form and re-tested after adding the herding behaviour factor. The study is based on Hwang and Salmon methodology, in which the state space approach based on Kaman’s filter was used to measure herding behaviour. We used monthly excess stock returns of 50 stocks listed on the EGX from January 2014 to December 2018. The results do not support Fama and French model before and after adding the herding behaviour factor, therefore, there is no effect of herding behaviour on the risk pricing in the Egyptian Stock Exchange.


2019 ◽  
Vol 11 (8) ◽  
pp. 80
Author(s):  
Sarika Keswani ◽  
Vippa Dhingra ◽  
Bharti Wadhwa

Market anomalies and irrational behavior caused investors changes in the stock market, and this has led to an investigation into the impact of various behavioral biases and factors affecting decision-making for individual investors. The purpose of this study was to find out the effect of the four factors, heuristic, prospect, market, herding on decisions of investors at NSE. Data are collected from the questionnaire on the basis of a likert scale. To determine the reliability of the questionnaire, the Cronbach alpha factor, which was 0.728, was used. EFA and multiple regression tests have been applied. Cronbach-alpha was used to check the interal consistency of the element. Cronbach alpha emphasized to each factor: Heuristic, Prospect, Market, Herding, Investment performance and Investors decisions that consistency at an acceptable level. The result of the analysis is that the four variables have greatly influenced the investment decision and return on investment. All behavioral variables have a significant impact on the decision-making process of investors, which led to the acceptance of all assumptions regarding the level of influence of behavioral factors in decision making for individual investors.


2018 ◽  
Vol 63 (1) ◽  
pp. 63-72
Author(s):  
Anita Todea

Abstract This paper examines the impact of financial literacy on stock price informativeness in a sample of firms from 20 countries. Using four measures of stock price informativeness, we find a significant relationship between higher financial literacy and higher stock price informativeness. The individual investors’ contribution regarding the incorporation of specific information into stock prices includes private information also and not mere specific information in the general sense. Financial knowledge is the key element that helps individual investors to incorporate specific information into stock prices.


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