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

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

Diversity and Ethnic Conflicts

This chapter evaluates the cultural, psychological, and moral issues surrounding revenge, justice, and forgiveness. Revenge is conceptualized as symbolic behavior showing wrongdoers that insults will be met with reprisal. Viewed through Fritz Heider’s lens, revenge is also an effort to change the underlying belief-attitude of the wrongdoer, often through aggressive retribution predicated on indignation and sometimes hatred. The legal system has sought to efficiently preempt, neutralize, and dilute these emotions by permitting victims a measure of legitimate revenge under the aegis of public order. However, as ethnic conflicts show, the legal system cannot abolish the zeal for revenge. In ethnic strife, each side perceives itself as the legitimate victim, removing claims for justice out of the realm of right or wrong and framing them mainly as issues of ethnic identification. A case in point is the author’s 1992–1993 study of the children of Nazis and the children of Holocaust survivors. The conference findings showed that the views and feelings the participants inherited from their parents created a barrier to establishing equal moral relations. One potential antidote to this conundrum resides in Immanuel Kant’s mandate: sapere aude, dare to know. One specific method for persuading individuals to pursue this mandate and eliminate belief perseverance is through an exercise in hypothetical reasoning, which trains people to live with ambiguity and multiple truths, and to develop flexibility in their belief systems. Ultimately, however, the finest balm for suffering and injustice is compassion.

Belief Perseverance

People’s proclivity to passionately cling to, and advocate for, beliefs or attitudes that exist in the absence of evidentiary support manifests in a range of life domains, including politics, sports, the workplace, social media, and relationships, among others. In fact, this propensity to develop, maintain, and unwaveringly cling to one’s beliefs in the absence of sufficient evidence is one of the most well-established tendencies in the social-psychological canon. It is a tendency that contributes to numerous psychological effects, including those involved in impression formation, comparative bias, attitude persuasion, intergroup perception, and social judgment, to name a few. And just as importantly, this tendency also has significant implications for judgment and decision-making in critical applied domains, including politics, jury deliberation, and medicine. The area of research that most directly illustrates this tendency is that on belief perseverance. Initially documented in the 1960s, belief perseverance refers to the tendency to maintain held beliefs even when the evidence supporting such beliefs is fully invalidated. It is the most extreme manifestation of espousing attitudes or belief systems in the absence of objective support—they are not merely beliefs based on evidence that is difficult to muster or verify, but rather, they are beliefs that persist despite their very evidential foundation being fully discredited as factually false. Since its initial conceptualization, research on belief perseverance has explored various mechanisms underlying the effect, moderating factors that influence the effect’s strength, and applied domains where belief perseverance has direct implications for judgment and decision-making. This bibliography explores the belief perseverance literature and is divided into six sections. General Overviews contains written works that provide a broad overview of the belief perseverance phenomenon. Seminal Demonstrations contains empirical articles considered to be seminal demonstrations of the belief perseverance effect. Explanatory Mechanisms includes studies that highlight key mechanisms driving belief perseverance, while Moderating Factors reviews boundary conditions that exacerbate or limit the strength of belief perseverance effects. Finally, Applied Investigations reviews articles exploring implications of belief perseverance in political, academic, judicial, and entertainment domains, while Related Perspectives discusses research areas closely related to, yet distinct from, belief perseverance in the social psychological literature.

Metaphor and (Dis)belief

In chapter 7 the importance of insight into how metaphor works in law (“seeing resemblance” according to Ricoeur) is elaborated upon in relation to the legal professional’s development of practical wisdom. The chapter discusses how metaphoric insight is both cognitive and perceptual. It argues that the professional needs to develop his or her legal imagination to be able to perceive similarity in what is initially thought of as dissimilarity to bridge the gap between the generality of the legal rule and the particularity of the individual situation in the case at hand. The chapter also connects the topic of metaphor to an understanding the psychological phenomenon of cognitive dissonance and its negative side-effects such as the confirmation bias and belief perseverance as the obverse phenomena of what Coleridge called poetic faith, i.e. the ability to comprehend contraries and to deal with uncertainties before jumping to conclusions.