Understanding the Influences of Cognitive Biases on Financial Decision Making During Normal and COVID-19 Pandemic Situation in the United Arab Emirates

Abstract

The purpose of the study is to identify the effects of behavioral/psychological factors i.e. overconfidence, anchoring bias, loss aversion, herding effect on financial decision making, in both normal situation (NS) and COVID-19 pandemic uncertain situation (CVD-19) separately. This paper used a qualitative method by using semi-structured interview (virtual and physical) and all fifteen interviewers were based in the United Arab Emirates. Whereas, the results of the study show that in NS all the factors have a positive significant relationship with financial decision-making. But on the other hand, in the CVD-19 uncertain situation, majority of the factors has a negative effect on financial decision making, except for overconfidence, which shows positive effect. Though the limitation was a time constraint, limited factors, and CVD-19 itself is a stressful environment and people do not prefer to participate in interviews. Finally, the future research direction is to increase sample size and factors to understand the financial decision impact on performance.