Abstract
Traditional financial theories describe investors as rationalist entities but the speculations experienced cannot be explained by existing theories. Behavioral finance argues that individual investors do not make rational financial decisions and that they are affected by their prejudices while making financial decisions.In this study, traditional finance theories, behavioral finance, psychological prejudices which are the subject matter of behavioral finance, individual investors and investment instruments, are discussed. Literature review regarding the local and foreign researches has been done and some explanations have been made in the light of crucial information about the subject matter.The application part of the study consists of the subject, purpose, methodology, hypothesis, statistical data and analysis of the research. The questionnaires were applied to randomly selected. 1002 individual investors in Istanbul and the obtained data were analyzed by Factor Analysis, İndependent T Test, One Way Variance Analysis (ANOVA) and Post-Hoc (Tukey Test) Tests. The results of these analyses reveal that individual investors living in Istanbul are not much rational while making investment preferences and that they are affected by the psychological prejudices. These results are in parallel with similar tests made in our country.
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