scholarly journals Impact of Behavioral Biases on Investment Decisions: Moderating Effect of Preferred Sector of Investment

2021 ◽  
Vol 6 (1) ◽  
pp. 37
Author(s):  
Shilpi Gupta ◽  
Monica Shrivastava
Keyword(s):  
Investment Decisions ◽  
Moderating Effect ◽  
Behavioral Biases

scholarly journals Impact of Heuristics on Investment Decisions: The Moderating Role of Locus of Control

2020 ◽  
Vol 5 (1) ◽  
pp. 1-14
Author(s):  
Jeetendra Dangol ◽  
Rashmita Manandhar
Keyword(s):  
Decision Making ◽  
Locus Of Control ◽  
Investment Decision ◽  
Investment Decisions ◽  
Sampling Procedure ◽  
Moderating Effect ◽  
Moderation Effect ◽  
Investment Decision Making ◽  
Overconfidence Bias ◽  
The Impact

This paper aims to assess the impact of heuristics on the investment decision by analysing the effect of four heuristic biases, i.e., representativeness, availability, anchoring and adjustment, and overconfidence bias on rationality of Nepalese investor's investment decision-making and also examines the moderating effect of the internal locus of control in between. The study used 391 respondents based on a convenient sampling procedure, and structured questionnaire survey. The study result indicates that there is a significant relationship between irrationality in investment decision-making and all four heuristic biases. In addition, the study also concludes that locus of control has significant moderating effect in the relationship between investment decisions and three heuristic biases, i.e., availability, representative and anchoring bias. However, the study documents no moderation effect in case of relationship with overconfidence bias.

scholarly journals An Analysis of Behavioral Biases in Investment Decision-Making

2019 ◽  
Vol 10 (4) ◽  
pp. 55 ◽  
Author(s):  
Geetika Madaan ◽  
Sanjeet Singh
Keyword(s):  
Decision Making ◽  
Positive Impact ◽  
Stock Exchange ◽  
Investment Decision ◽  
Investment Decisions ◽  
Individual Investors ◽  
Behavioral Biases ◽  
Investment Decision Making ◽  
Survey Responses ◽  
The Impact

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.

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.

scholarly journals How do emotional intelligence and behavioral biases of investors determine their investment decisions?

2020 ◽  
Vol 14 (1) ◽  
pp. 35-47
Author(s):  
Saloni Raheja ◽  
Babli Dhiman
Keyword(s):  
Decision Making ◽  
Stock Exchange ◽  
Investment Decision ◽  
Sample Selection ◽  
Investment Decisions ◽  
Risk Tolerance ◽  
Content Type ◽  
Behavioral Biases ◽  
Investment Decision Making ◽  
The Impact

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.

scholarly journals The Influence of Equity Incentive on Overinvestment in enterprises: The moderating effect based on the heterogeneity of executive team

2021 ◽  
Vol 245 ◽  
pp. 03033
Author(s):  
Wei Liu ◽  
Tingting Yang ◽  
Xiao Le
Keyword(s):  
Investment Decisions ◽  
Listed Companies ◽  
Moderating Effect ◽  
Management Team ◽  
Senior Management ◽  
Team Heterogeneity ◽  
Executive Team ◽  
The Relationship ◽  
Equity Incentive ◽  
A Share

This paper empirically examines the moderating effect of executive team heterogeneity on the influence of equity incentive on overinvestment behavior by using the data of Chinese A-share listed companies in Shanghai and Shenzhen from 2014 to 2018. The results show that equity incentive can restrain the overinvestment behavior of enterprises; The greater the age heterogeneity of the senior management team, the weaker the influence of equity incentive on overinvestment will be; The greater the gender heterogeneity of the senior management team, the greater the influence of equity incentive on the overinvestment of enterprises will be. The heterogeneity of executive team education and tenure has no effect on the relationship between equity incentive and overinvestment. The conclusion of this study has some enlightenment on how to construct and optimize the senior management team of listed companies, so that the senior management team can play its role fully and make reasonable and effective investment decisions.

scholarly journals Impact of Behavioral Biases on Investment Performance in Pakistan: The Moderating Role of Financial Literacy

2020 ◽  
Vol 6 (4) ◽  
pp. 1199-1205
Author(s):  
Amir Rafique ◽  
Muhammad Umer Quddoos ◽  
Usama Kalim ◽  
Muhammad Ramzan Sheikh
Keyword(s):  
Financial Literacy ◽  
Stock Exchange ◽  
Investment Decisions ◽  
Equation Modeling ◽  
Investment Performance ◽  
Policy Makers ◽  
Behavioral Biases ◽  
Structured Equation Modeling ◽  
Moderating Role

This study aims at understanding the relationships of certain behavioral biases with the investment performance, and identifies the moderating role of financial literacy upon these hypothesized relationships. Data is collected through questionnaire from the investors trading at Pakistan Stock Exchange (PSX). Structured Equation Modeling (SEM) is used to analyze the data with the results that only anchoring and overconfidence biases have significant effects on investment performance. The results also show that presence of financial literacy does not play any role in improving the performance of investors. Majorly, findings of current study contribute by testing the moderating role of financial literacy between the behavioral biases and the outcome of investment decisions and thus expected to be useful for investors and policy makers.  

Do behavioral biases differ among institutional and individual investors?

2021 ◽  
pp. 61-73
Author(s):  
Roshani Chamalka Gunathilaka ◽  
◽  
J. M. Ruwani Fernando ◽  
Keyword(s):  
Decision Making ◽  
Institutional Investors ◽  
Emerging Market ◽  
Investment Decisions ◽  
Equation Modeling ◽  
Disposition Effect ◽  
Individual Investors ◽  
Behavioral Biases ◽  
The Individual ◽  
Overconfidence Bias

Purpose: The purpose of this paper is to investigate how does the behavioral biases differ among the individual and institutional investors based on Colombo Stock Exchange. The study considers the effect of four behavioral biases; overconfidence bias, representativeness bias, disposition effect and herd mentality bias on the financial investment decision making of individual investors and institutional investors. Design / methodology / approach: A questionnaire was utilized to collect the data and the final sample consisted with 104 individual and 71 institutional respondents. The data of 175 investors was analyzed by using Partial Least Square-Structural Equation Modeling approach. Findings: The study revealed that disposition effect make an impact on the investment decisions of both individual investors and institutional investors whereas overconfidence bias has impact only on the individual investors’ investment decisions. Originality: This study is one of the pioneering studies examining the behavioral biases differences of individual and institutional investors’ decision making. Thus, this study expands the existing literature in the field of behavioral finance particularly in emerging market context. In this sense, the findings of this study could draw important inferences for researchers, investors and policy makers to ensure that they make rational investments decisions.

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.

Do behavioral biases in gender differences affect investment decisions?

2019 ◽  
Vol 3 (4) ◽  
Author(s):  
Ghulam Mustafa Shaikh ◽  
Naveeda Karim Katpar ◽  
Maryam Kalhoro ◽  
Yusira Kamal Abro ◽  
Ghulam Abbas Phanwar
Keyword(s):  
Gender Differences ◽  
Investment Decisions ◽  
Behavioral Biases
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