Abstract
Egyptian investors have lost a large portion of their investment due to the coronavirus pandemic. This research is novel research that aims to identify the behavioral factors of Egyptian investors that affect their investment decisions, before and after the pandemic. A number of survey questionnaires were distributed to Egyptian investors, in addition to personal interviews. Descriptive statistics and a regression model were used to analyzing the impact of psychological factors on the investment decisions for Egyptian investors. Results revealed that demographic and psychological factors influence investment decisions: overconfidence, loss, and regret aversion, disposition effect, representativeness and herding behavior, but it is not affected by gambler’s fallacy. It is affected also by some other demographic variables. However, income level has no effect. After the pandemic, not all demographic and psychological factors affect Egyptian investor’s behaviour. The behaviour finance theory is valid only and applied before the pandemic. This research opens the door for a new dimension to studying how to work on the governance of investors’ decisions, rationalizing those decisions and their effectiveness, which ultimately contributes to achieving high returns on their investment portfolios.
Highlights
Literature science of finance has three schools of thought: old, modern, and new finance
Low investment value has a significant relationship with Egyptian investors who have a return of 11% to 12% than those who have more than 31% or more by 3.57 times
Demographics and psychological factors affect the behaviour of Egyptian investors: in terms of demographics factors before COVID-19, age has a positive impact relationship on investor’s investment value
Summary
Literature science of finance has three schools of thought: old, modern, and new finance. The modern school focused on asset pricing models and different valuation techniques employing rational economic behavior. Financial theories have been based on rational investors and the market efficiency hypothesis. Investors are always seeking to maximize their returns against acceptable certain levels of risk This remains the reason for the irrationality of investor’s behavior. The efficient market theory has been criticized for a number of reasons since it assumes that: All investors have the same expectation regarding stock prices. If this is the case security trading would not exist because we will not find any investor ready to sell or purchase
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