Abstract
The aim of the study is to examine the effect of behavioral biases on stock market investors’ decision making in Dhaka Stock Exchange. We focused on three well-documented biases i.e., disposition effect, herd behaviour and gambler’s fallacy. In this study we utilized primary data which were collected through our survey questionnaire. Based on these information, descriptive statistics were employed to construct different bias grades. We explored that women do not actively participate in security market as seen on interview time although women also invest in the security market, but most of the activities in the security market are carried out by men. It is also stimulating that seventy seven percent respondents are within the economic active age group, of 30-50 years which thus indicates a positive sign of the market. Moreover, the data reveals that the greater portion of our investors are bachelor graduate. In addition to that the most of the individual investors’ experience are within 3 to 10 years. After building bias grade of the above mentioned behavioral biases it can be settled that our participants are, on average, moderately affected by behavioral biases. And lastly, a hypothesis was inspected that the behavioral biases are more obvious for less experienced investors but our results support this hypothesis weakly. As we conceive that investors do not learn from experience and perform illogically in the stock market.
Highlights
A variety of systematic biases and distortions influence market participants which create systematic errors and produce incorrect and inferior performance contrary to assumption of rational market participants
It reveals the fact that women do not actively participate in security market as seen on interview time women invest in the security market, but most of the activities in the security market are carried out by men
Ninety two (37%) are within the age group of 30-40 years, 99 (40%) are within the age group of 40 - 50 years of age, 37 (15%) are within the age group of 50-60 years, 6 (3%) are within the age group of 60 year and above. This implies that most of the respondents are within the economic active age group, of 30 – 50 years which represents 77% of the total respondents
Summary
A variety of systematic biases and distortions influence market participants which create systematic errors and produce incorrect and inferior performance contrary to assumption of rational market participants. In Bangladesh, individual investors behaviour are influenced by different biases, i.e., overconfidence, overtrading, disposition effect, over-reaction, greed, etc [9]. These are more exist during upward trend in the market. Under investment and poor infrastructure are crucial features of Bangladesh economy that hinder economic development which needs attention In this regard organized and wellfunctioning capital market can play a vital role through facilitate investment in efficient and profitable ventures. Through these time the turnover ratio increased from 1.6483 percent to 54.2524 percent From these pictures one can deduce the better efficiency of Bangladesh’s Dhaka stock exchange market. This information was not level during that period and had been shown greater volatility
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