scholarly journals Investment Portfolios in an Emerging Economy: What Drives Portfolio’s Diversification?

2017 ◽  
Vol 7 (1) ◽  
pp. 1-10
Author(s):  
Pedro Luiz Albertin Bono Milan ◽  
William Eid Jr.
Keyword(s):  
Behavioral Finance ◽  
Investment Decisions ◽  
Personal Characteristics ◽  
Emerging Economy ◽  
Heterogeneous Database ◽  
Risky Assets ◽  
Investment Portfolios ◽  
Finance Theory

This study sheds light on the investment portfolio’s decisions through behavioral insights. The study intends to identify personal characteristics that drive the level of diversification and lead investors to allocate resources in risky assets in an emergent economy, deepening the discussion about investment decisions and bringing some behavioral insights to the debate. The study has a unique and heterogeneous database of individual financial allocations from Brazil, one of the largest emergent economies. The characteristics of Brazilian investors play an important role in investment decisions, high educated and married investors tend to display diversified portfolios. To invest in risky assets, male investors have a 43% greater likelihood of investing in risky assets than females, highlighting the discussion on gender and investment decisions. Moreover, married investors tend to exhibit conservative portfolios. We observed that traditional investors are under-diversified, allocating primarily in traditional and safety assets. The results suggest that the investment decisions can be subject to psychological biases defined in behavioral finance theory.

scholarly journals Investigating the psychological factors that affect Egyptian investors’ behaviour and decisions before and after the pandemic

2021 ◽  
Vol 10 (4) ◽  
pp. 113-129
Author(s):  
Hassan M. Hafez
Keyword(s):  
Psychological Factors ◽  
Investment Decisions ◽  
Demographic Variables ◽  
Descriptive Statistics ◽  
Before And After ◽  
Investment Portfolios ◽  
Finance Theory ◽  
Regret Aversion ◽  
The Impact ◽  
Survey Questionnaires

Egyptian investors have lost a large portion of their investment due to the coronavirus pandemic. This research is novel research that aims to identify the behavioral factors of Egyptian investors that affect their investment decisions, before and after the pandemic. A number of survey questionnaires were distributed to Egyptian investors, in addition to personal interviews. Descriptive statistics and a regression model were used to analyzing the impact of psychological factors on the investment decisions for Egyptian investors. Results revealed that demographic and psychological factors influence investment decisions: overconfidence, loss, and regret aversion, disposition effect, representativeness and herding behavior, but it is not affected by gambler’s fallacy. It is affected also by some other demographic variables. However, income level has no effect. After the pandemic, not all demographic and psychological factors affect Egyptian investor’s behaviour. The behaviour finance theory is valid only and applied before the pandemic. This research opens the door for a new dimension to studying how to work on the governance of investors’ decisions, rationalizing those decisions and their effectiveness, which ultimately contributes to achieving high returns on their investment portfolios.

scholarly journals The influence of XTFs on risk and return of households’ investment portfolios

2021 ◽  
Author(s):  
◽  
Hans Philipp Wanger
Keyword(s):  
Behavioral Finance ◽  
Institutional Economics ◽  
Risk Measures ◽  
New Institutional Economics ◽  
Exchange Traded Funds ◽  
Risk And Return ◽  
Household Portfolios ◽  
Investment Portfolios ◽  
Finance Theory ◽  
Empirical Analyses

In this doctoral thesis, XTFs are considered as plain-vanilla Exchange Traded Funds which pursue a passive investment approach and replicate a broad, internationally diversified market index. The thesis pursues two research goals. First, to investigate whether XTFs enhance risk and return of household portfolios when taking multiple relevant asset classes into account – not only stocks. Second, to examine whether employing XTFs in household portfolios is reasonable when including practical constraints and risk measures that reflect households’ actual investment situation and interpretation of risk more closely compared to previous literature. To meet these research goals, three empirical analyses are conducted. The analyses are built on the foundations of neoclassical finance theory, new institutional economics, market microstructure theory, financial intermediation, as well as behavioral finance and economics. For the empirical investigations, two data sets of the German central bank (Deutsche Bundesbank) are combined: The Panel on Household Finances-survey and the Securities Holdings Statistics-base. The thesis ends by discussing the empirical analyses' results, possible limitations to the findings' generalizability, and implications for different stakeholders.

scholarly journals The Cost of Information in Dependence on the Investor Relation to the Risk

2012 ◽  
Vol 11 (1) ◽  
pp. 73-85
Author(s):  
Simona Hašková
Keyword(s):  
Decision Making ◽  
Utility Theory ◽  
Investment Decision ◽  
Investment Decisions ◽  
Reliable Estimate ◽  
Ordinary People ◽  
Cardinal Utility ◽  
Finance Theory ◽  
The Cost

Abstract The contribution sets simple mathematic models describing and explaining the way of behavior of various types of investors (the private and institutionalized ones). The models come from the cardinal utility theory which is used for explaining the connection between the subjective relationship towards risk and some pathologic phenomenon of finance theory (for example the moral hazard question of institutionalized investors) and takes into account the decision making of both ordinary people and professional investors. A reliable estimate of the economic surroundings where the investment should run contributes significantly to a quality of the particular investment decisions. The article contributes to a quality of the investment decision by the original and primary approach to pricing information that lowers the uncertainty in occurrences of the relevant scenarios of the project’s development. At the conclusion there is shown how the shift of the decision breaking point shapes the amount of the acceptable price of the information.

Effect of Disposition Effect on Investment Decision Making in Property Market in Plateau State, Nigeria

2019 ◽  
pp. 83-98
Author(s):  
Dashol Ishaya Usman ◽  
Mary Pam
Keyword(s):  
Decision Making ◽  
Behavioral Finance ◽  
Investment Decision ◽  
Investment Decisions ◽  
Primary Data ◽  
Property Market ◽  
Financial Decisions ◽  
Descriptive Research ◽  
Investment Decision Making ◽  
Plateau State

The purpose of the chapter was to establish the effect of disposition on investment decision making in property market in Plateau State, Nigeria. Descriptive research design was used in the study. Primary data was collected using standard questionnaires with both closed and open-ended questions. The regression analysis results confirmed that there was a significant positive linear relationship between disposition and investor investment decision making in property market in Plateau State in Nigeria. The study concluded that disposition effects bias does not alter rationality in investment decision making. Disposition affected investment decisions. The main recommendation for investors is to make constant attempts to increase their awareness on behavioral finance by educating themselves on the field. Studying about the biases and reflecting on their decisions are likely to help achieve better self-understanding of the extent and manner to which they are influenced by emotions while making financial decisions under uncertainty.

Linking Personal Values to Investment Decisions Among Individual Shareholders in a Developing Economy

2019 ◽  
pp. 24-45 ◽  
Author(s):  
Otuo Serebour Agyemang
Keyword(s):  
Grounded Theory ◽  
Behavioral Finance ◽  
Personal Values ◽  
Investment Decisions ◽  
Clear Distinction ◽  
Theory Approach ◽  
Developing Economy ◽  
Decision Sciences ◽  
The Individual ◽  
Grounded Theory Approach

This chapter examines the link between personal values and investment decisions among individual shareholders in a developing economy. It contributes to the knowledge on behavioral finance and decision sciences that individual shareholders' personal values have influence on their investment decisions and the choice of companies they invest in. It employs a grounded theory approach. The chapter highlights that individual shareholders hold value priorities and that honesty, a comfortable life and family security play a significant role in their lives and their investment decisions and the kind of companies they make investment in. In addition, to the individual shareholders, there is a clear distinction between a comfortable life and a prosperous life in the sense that they are not incentivized more by the latter but the former in their investment decisions.

Is Technical Analysis Profitable even for an Amateur Investor?

2015 ◽  
pp. 255-269
Author(s):  
Vasileiou Evangelos
Keyword(s):  
Stock Market ◽  
Transaction Costs ◽  
Behavioral Finance ◽  
Investment Decisions ◽  
Technical Analysis ◽  
Moving Averages ◽  
Trading Rules ◽  
Trading Decisions ◽  
Transaction Fees

The purpose of this chapter is to examine if even the simplest trading rules could take advantage of the market's inefficiency and lead to profitable trading decisions. For this reason, this study examined the profitability of the simplest trading rules, using only the simple moving averages (SMA) rules that even an amateur investor could apply. In order to examine the specific issue a data sample from the Greek stock market during the period 2002-12 was used. The results suggest that even if one takes into account the most expensive transaction fees, the trading rules signal profitable investment decisions; therefore, even an amateur trader and/or investor who does not have a significant amount of money to invest (which may lead to reduced transaction costs) could take advantage of the market's inefficiency. Behavioral finance theories may provide some useful and alternative explanations regarding some of the reasons that contribute to the Greek stock market's inefficient environment.

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.

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