Behavioural Factors in the Hungarian Retail Government Bond Market

Abstract

It has long been known that the decision-making of money market participants deviates from the pattern outlined by textbook models. This study attempts to explore the real processes taking the approach of behavioural finance, and analyses the hypothetical investment decisions of Hungarian retail government bond investors based on the literature of behavioural finance theses. The analysis relies on the results of a representative opinion poll using behavioural finance theory on the government bond market as a basis. The survey covers the political, emotional and literacy factors underlying the decisions. It examines the herding effect, the influence of demographic factors, and as a new approach, it outlines the profile of Hungarian retail investors. One other novel result of the survey is that it confirms a number of commonly known assumptions about the behaviour of retail investors through collecting data, while reviewing and synthesising behavioural finance literature specifically relevant to the government bond market.