Sell Winners and Buy Losers? The Impact of Familiarity on Individual Investors’ Decision-Making: Experimental Results

Purpose: This article analyzes the influence of familiarity bias on respondents’ decision-making process, using results from online experiments. Design/methodology/approach: A total of 255 research participants from post-Soviet countries completed 510 online tests that were presented in the form of investment games. In the games, the respondents were allowed to sell, buy, or hold two types of asset portfolios: familiar and unfamiliar assets. Findings: Holders of portfolios with familiar assets were 1.34 times more likely to be persistent in selling winners and holding losers and 1.10 times more likely to be persistent in buying fallen assets than holders of unfamiliar portfolios. Moreover, respondents who managed familiar assets tended to generate terminal result distributions with a kurtosis that was 27.8% higher than the distributions of those managing unfamiliar assets. Originality: Several academic studies have examined familiarity bias, the disposition effect, the positive feedback trading of individual investors, and risk-seeking trading; however, they investigated these topics separately. In the current study, we therefore created an online experiment to identify new aspects of investor behavior.

HOW FAMILIARITY IMPACTS INFLUENCE IN COLLABORATIVE TEAMS?

Individual traits strongly impact team composition and the biases arising from them can also impact design activities. One such bias highlighted in the study is the familiarity bias (i.e., a bias that might be present between the two individuals due to their prior acquaintance). In order to detect the familiarity bias, participants from 4 universities who evaluated their peers and rated them for (1) their perceived degree of influence, (2) trust, (3) the amount of agreement they had with the other team member and (4) the amount of agreement the other individual in the team had with them. It was found that familiarity bias exists in collaborative teams. Its impact on the four variables, especially on influence, was discovered. In the end, the study briefly highlighted the importance of studying the factors (like the one revealed in this study) that affect influence in design teams as it eventually impacts design outcome. It was found that the individuals who explore most idea clusters, are less likely to be perceived influential and teams having the most influence produced a smaller number of idea clusters. Overall, the study contributes to understanding the factors affecting human cognition and behaviour in the design teams.

Pengaruh Self-Attribution Bias, Mental Accounting, dan Familiarity Bias terhadap Pengambilan Keputusan Investasi

Terdapat banyak faktor yang mempengaruhi pengambilan keputusan investasi, termasuk faktor psikologis yang bersifat bias yang dapat membuat investor menjadi irrasional. Oleh karena itu, tujuan penelitian ini adalah untuk mengetahui beberapa pengaruh bias, yaitu self-attribution bias, mental accounting, dan familiarity bias terhadap pengambilan keputusan investasi. Sampel dalam penelitian ini adalah mahasiswa yang mengikuti beberapa komunitas investasi di Kota Malang karena mahasiswa mewakili investor muda yang potensial untuk berkontribusi dalam berinvestasi di pasar modal. 288 kuesioner disebarkan secara online dan diuji regresi berganda. Hasil penelitian ini adalah self-attribution bias, mental accounting, dan familiarity bias berpengaruh positif terhadap pengambilan keputusan investasi. Kepercayaan atas kemampuan diri, pertimbangan biaya dan manfaat, serta tingkat keakraban menjadi faktor utama yang mendorong pengambilan keputusan investasi.

Noise of Investors’ Attention Mania in the Twenty-first-Century Indian Stock Markets: ARDL and Augmented GARCH-X Models

What brings the equilibrium consensus in the stock markets? We hypothesize that the markets’ equilibrium consensus depends on the noise of investors’ attention mania (NIAM). We refer to the NIAM as investors’ attention heterogeneity and explore its impacts on the National Stock Exchange (NSE) Nifty and Bombay Stock Exchange (BSE) Sensex stocks market returns. We use the methodology of the autoregressive distributed lag (ARDL) and augmented generalized autoregressiuve conditional heteroskedacity (GARCH)-X model, and we examine if there is the presence of NIAM at online attention searches within and across the attention layers, and within and across the stated two stock markets from 2004 to 2019 for investors’ economic–political attention searches. We have revealed that the impacts of the NIAM on the market returns are diverse in nature at the different attention layers and stock markets as well. Besides the ARCH and GARCH effects, we also document the presence of familiarity bias, attention confidence or confusion, and attention integration in the short run and long run.

Measuring Equity Share Related Risk Perception of Investors in Economically Backward Regions

Risk perception is an idiosyncratic process of interpretation. It is a highly personal process of making a decision based on an individual’s frame of reference that has evolved over time. The purpose of this paper is to find out the risk perception level of equity investors and to identify the factors influencing their risk perception. The study was conducted using a stratified random sampling design of 358 investors. It was found that the overall risk perception level of equity investors is moderate and that the main factors affecting their risk perception are information screening, investment education, fear psychosis, fundamental expertise, technical expertise, familiarity bias, information asymmetry, understanding of the market, etc. Considering the above findings, efforts should be made to bring people with a high risk perception to the low risk perception category by providing them with training to handle or manage high-risk scenarios which will help in promoting an equity-investment culture.