scholarly journals Investigation of Variation between Risk Attitude and Investment Biases

2016 ◽  
Vol 1 (No. 1 Oct 2016) ◽  
pp. 57-80
Author(s):  
Cherie H Chen ◽  
Handley-Schachler Morrison
Keyword(s):  
Decision Making ◽  
Loss Aversion ◽  
Financial Risk ◽  
Experimental Approach ◽  
Investment Decision ◽  
Risk Attitude ◽  
Personality Profiles ◽  
Financial Investment ◽  
Investment Decision Making ◽  
Investment Behaviour

There is a palpable link between financial investment decision making and investors’ behaviour. Research into investors’ behaviour may prove useful in increasing our understanding of the extremely complex financial marketplace. In many cases, investors are unaware of their predisposition for error. And more often, an irrational investor is a dissatisfied investor, because biases usually undermine financial goals. By adopting an experimental approach, the researchers try to correlate established investor biases with the psychographic profiles of investors, to see whether specific risk personality profiles correlate with susceptibility to four biases: herding, endowment, loss aversion and framing. Many studies have focused on exploring the demographics of investment behavioural flaws, but very little attention has been paid to the risk attitude of investors and their actual investment behaviour. The findings of this study bridge two aspects of literature, being attitude to financial risk and behavioural investment biases.

scholarly journals Analysing the Effect of Financial Risk Perception, Risk Tolerance on Investment Behaviour: An Empirical Analysis

2021 ◽  
Vol 12 (3) ◽  
pp. 5511-5516
Author(s):  
M Ramu Et. al.
Keyword(s):  
Decision Making ◽  
Risk Perception ◽  
Financial Risk ◽  
Investment Decision ◽  
Risk Tolerance ◽  
Objective Reality ◽  
Investment Decision Making ◽  
Complex Process ◽  
Made In ◽  
Investment Behaviour

Investment decision making is a complex process that depends on several factors that vary from one individual to another. Regardless of the type of decision that is made in life, people behave differently. To distinguish between risk tolerance and risk perception, we must first define risk. Risk is, of course, uncertainty about the result. Any decision that casts doubt on at least one of the possible outcomes is risky. Perception is the assessment of a level of risk which usually involves an understanding of the situation, that is, there is an explanation for objective reality. Risk tolerance is the level at which an individual is willing to accept the risks associated with investments. This paper determines the relation between risk perception, risk tolerance and investment behaviour using inferential statistical analysis and draws the conclusions from the obtained results

scholarly journals Factor Influencing Investor’s Decision Making in Indonesia: Moderating the Role of Locus of Control

2020 ◽  
pp. 49-56
Author(s):  
Febria Nalurita ◽  
Farah Margaretha Leon ◽  
Hamdy Hady
Keyword(s):  
Decision Making ◽  
Locus Of Control ◽  
Loss Aversion ◽  
Structural Equation ◽  
Investment Decision ◽  
Equation Modeling ◽  
Investment Decision Making ◽  
Market Factors ◽  
Regret Aversion

This study aims to investigate the effect of loss aversion, regret aversion, and market factors, on investment decision making with the moderating role of locus of control. Data collection is done by distributing questionnaires. The survey was conducted on individual investors in the Indonesia Stock Exchange in Jakarta to obtain a sample of 281. This research uses the Structural Equation Modeling approach. The statistical tool used is LISREL 8.8. This study found that loss aversion, regret aversion, and market factors significantly influence investment decision making. Locus of control plays the role of moderation between loss aversion, regret aversion, market factors, and investment decision making. The novelty in this study reveals the research that needs to be done to encourage investors to make rational decisions and control the required rate of returns through their locus of control. This research helps investors to make decisions logically and rationally with an open mind, high-performance thoughts and positive actions for investment goals that produce positive returns.

scholarly journals Effect of Emotional Biases on Investor’s Decision Making in Nigeria

2020 ◽  
Vol 4 (1) ◽  
pp. 33-39
Author(s):  
Ebenezer Y. Akinkoye ◽  
Oluwaseun E. Bankole
Keyword(s):  
Decision Making ◽  
Loss Aversion ◽  
Stock Exchange ◽  
Investment Decision ◽  
Investment Decisions ◽  
Primary Data ◽  
Investment Decision Making ◽  
Regret Aversion ◽  
Overconfidence Bias ◽  
Structured Questionnaire

The study examined emotional biases and its effect on investor’s decision making in Nigeria Primary data were employed and the population consists of clients of the top 10 stockbroking firms registered by the Nigerian Stock Exchange as at 31st January, 2018. These firms were selected because they contributed to 68.72% of total value of transactions as at 31st January, 2018. Data on emotional biases and investment decision making among investors in Nigeria were obtained through structured questionnaire which was administered to 30 clients of each stockbroking firm, totalling 300. Data analysis was done using percentages and logistic regression analysis. Findings showed that emotional biases, represented by loss-aversion bias, overconfidence bias, regret-aversion bias and herding bias were prevalent to Nigerian investors and also significantly influenced investor’s decision making in Nigeria. The study suggests that investors should improve the understanding of various emotional biases and traits exhibited by them, adopt a suitable decision technique to avoid this and seek experts’ opinion when making investment decisions.

scholarly journals Does COVID-19 really make people risk aversion in investment decision-making?

2022 ◽  
Vol 132 ◽  
pp. 01021
Author(s):  
Muhammad Shadab Iqbal ◽  
Lin Li
Keyword(s):  
Decision Making ◽  
Risk Aversion ◽  
Behavior Analysis ◽  
Risk Behavior ◽  
Investment Decision ◽  
Household Finance ◽  
Financial Investment ◽  
Body Of Knowledge ◽  
Investment Decision Making ◽  
Economic Slowdown

The economic fallout from COVID-19 pandemic changes individuals’ investment perceptions and behaviors in a tremendous way. Consequently, investment decision-making has been affected as people have to adjust to the new environment. This study aims to study whether COVID-19 really make people risk aversion due to the economic slowdown. Our empirical results are analyzed from household finance data in U.S in July 2021. It is found that COVID-19 proximity, income, and occupation are positively associate with risking taking in investment decision-making, while age and family size are not. This study contributes to the newly emerged body of knowledge on post pandemic investment decision-making and risk behavior analysis and provide implications for financial investment institutions.

Impact of socio-psychological factors on investment decisions: The mediating role of behavioral biases

2020 ◽  
Author(s):  
Sadia Jabeen ◽  
Syed Zulfiqar Ali Shah ◽  
Naheed Sultana ◽  
Altamash Khan
Keyword(s):  
Decision Making ◽  
Social Interaction ◽  
Loss Aversion ◽  
Investment Decision ◽  
Equation Modeling ◽  
Behavioral Biases ◽  
Mediating Role ◽  
Investment Decision Making ◽  
The Relationship

Unlike previous studies that examine the effect of behavioral biases on investor decision-making, this study explores the root causes of behavioral biases and examines the mediating role of behavioral biases in the relationship between different types of emotions and investment decision-making. The cognitive theory of depression, attentional control theory, and prospect theory together provide the foundation and anticipate that stress, depression, anxiety, and social interaction are the major sources of cognitive mistakes that,in turn, affect investment decision-making. Model testing relies upon the data collected from 252stock investors trading in different stock exchanges of Pakistan; in order to test the hypothesized relationship, structural equation modeling has been used. Depression is a major source of loss aversion bias. Anxiety is a strong source of herding. Stress is a major source of representative bias.Social interaction is a root cause of overconfidence. Loss aversion bias, herding, and overconfidence fully mediate the relationship between depression, anxiety, social interaction, and investor decision; however, anxiety has the strongest impact on investor decision via herding bias, while stress has both insignificant direct and indirect effect on investment decision-making. Keywords: Sources of biases, self-efficacy, behavioral pattern, investment decision.

scholarly journals INVESTMENT DECISION MAKING TOWARDS INVESTING IN ISLAMIC UNIT TRUSTS AMONGST WOMEN

2021 ◽  
Vol 16 (Number 1) ◽  
pp. 43-54
Author(s):  
Nor Izzati Mohd Aziz ◽  
Salina Kassim
Keyword(s):  
Financial Literacy ◽  
Investment Decision ◽  
Risk Attitude ◽  
Sampling Technique ◽  
Men And Women ◽  
Financial Investment ◽  
Self Confidence ◽  
Investment Decision Making ◽  
Investment Volume ◽  
Unit Trust

The differences in skill expectations and knowledge are amongst factors that contribute to the variances when men and women choose financial products. Women are claimed to be risk averse, somewhat insecure, lacking self-confidence and interest in financial investment products. Nevertheless, the evolving working and educational environment has changed this stereotype, wherein women are increasingly more educated, knowledgeable, and are more exposed to investments. Gender equality between men and women in terms of the volume of investments has turned into a requirement that boosts economic growth with people being the most important factor to contribute through investing habit. This cannot be realised if only men are involved in investment. Financial institutions aim certain figures of targeted investment volume each year. As such, this study identified the factors of women investments, particularly in Islamic unit trusts. A total of 201 respondents were selected via the convenience sampling technique. The Likert scale questionnaires were analysed using SMART PLS software. As a result, several investment behaviours, including investment objectives, return expectations, awareness, and risk attitude, emerged as factors that influenced women investors to choose unit trusts. The study outcomes are beneficial in devising effective strategies that may attract women to invest in Islamic unit trust. Besides, certain agencies should conduct campaigns or seminars on financial literacy for this potential sector, so as to enhance their knowledge in investing in Islamic unit trusts.

scholarly journals IMPACT OF LOCUS OF CONTROL ON INVESTMENT BEHAVIOUR: A SEGMENTATION APPROACH

2021 ◽  
Vol 9 (2) ◽  
pp. 1144-1163
Author(s):  
Fiona Sheenu Francis, Et. al.
Keyword(s):  
Decision Making ◽  
Locus Of Control ◽  
Investment Decision ◽  
Great Influence ◽  
Vital Role ◽  
Individual Investors ◽  
Investment Decision Making ◽  
Segmentation Approach ◽  
The Impact ◽  
Investment Behaviour

Investment plays a vital role in a developing country such as India, as it provides the necessary funds for undertaking productive activities to be circulated in the economy. Savings are our country's largest source of investment. Investments are subject to the individual’s attitudes, beliefs and perceptions. As a result, the attitudes and expectations of investors have a major impact on their investment behaviour. Locus of Control is one of the most important factors that affect individual’s decision-making behaviour. Locus of Control is people's assumptions about what causes their lives to have good and bad outcomes (Rotter, 1966). It is said that there is internal and external LOC. Individuals with internal LOC assume they control their own destiny, whereas individuals with external LOC relate their experiences to destiny, luck or chance. Consequently, LOC has a great influence on an individual's investment decision-making behaviour. As a result, this study attempts to assess the LOC of an individual investors, segment them based on their level of internal and external LOC, and also to understand the impact of locus of control on the savings and investment behaviour of individual investors. The study revealed that most of the investors in Kerala were moderates and the locus of control of an individual investor affected their savings and investment behaviour                       

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