Biases Of Investors Research Articles

The Characteristics and Portfolio Behavior of Bitcoin Investors: Evidence from Indirect Cryptocurrency Investments

Abstract Cryptocurrencies have received growing attention from individuals, the media, and regulators. However, little is known about the investors whom these financial instruments attract. Using administrative data, we describe the investment behavior of individuals who invest in cryptocurrencies with structured retail products. We find that cryptocurrency investors are active traders who are prone to investment biases and hold risky portfolios. Cryptocurrency investors are more likely to invest in stocks with high media sentiment and more likely to employ heuristics from technical analysis. In line with attention effects and anticipatory utility, we find that the average cryptocurrency investor substantially increases account logins and trading activity after his or her first cryptocurrency purchase. Furthermore, cryptocurrency investors tend to tilt their portfolios toward even more risky securities after cryptocurrency adoption. Our results document which investors are more likely to adopt new financial products and help inform regulators about investors’ vulnerability to cryptocurrency investments.

A Study on Changing Role of Investor Behaviour towards Digital Investments – Pre and During COVID-19 Scenarios

World markets are facing anxiety and vulnerability due to global pandemic of COVID-19.Investors are becoming cautious while selecting their investment avenues and hence theirfocus is shifting to more secure forms of investments. Cryptocurrencies are one of therenowned form of digital investments and has drawn attention of many investors since itsorigination. Since 2013 it has been attracting and shifting eye balls of many financial and ITresearchers with its excellent returns and use of advanced technology. The present study hasexplored the impact of COVID-19 on the investor behaviour towards digital currencies. Forthe very same purpose researchers have considered pre and during COVID phases andcompared the shift in volatility of five selected cryptocurrencies. The study has also explored few of the most prominent investor biases which influences investor behaviour and how these biases have shifted during global pandemic of COVID-19. Some of the prominent biases such as, availability bias, regret, mental accounting and herding have been recognized in the study to understand investor behaviour.

Trust and local bias of individual investors

We examine the effects of social trust on the local bias of individual investors. Using the trading records of Chinese retail investors, we find that investors with higher trust exhibit lower local bias in their stock portfolios, and this pattern holds under various robustness tests. We further show that trust helps accomplish greater portfolio diversification and reduces familiarity-based investment bias in general. These findings suggest that trust plays an important role in individual investors’ financial decisions, especially when they face unfamiliar investment opportunities.

Impact of Behavioral Biases on Investment Decisions: Moderating Effect of Preferred Sector of Investment

The study aims to recognize the behavioral biases that influence the decisions making process and investment decisions of retail investors while investing in stocks of insurance and pharmaceutical sector stocks. The paper also aims at checking the moderating effect of the preferred sector of investment on these relationships. The conceptual model derived from past literature was checked for its reliability and validity, using measurement model assessment and structural model assessment. Hypothesis or the study were tested using bootstrapping in PLS-SEM. The result of the study revealed that heuristics and prospects have significant influence, while herd behavior has no significant influence on investor’s investment decisions while investing in insurance or pharmaceutical sector securities. The results of the moderation test infer that the relation of heuristic and prospect with investment decision is moderated by the preferred sector of investment. A clear picture of these biases and their influence, established by the findings of the study, would lead to a better understanding of the same and help prevent investors from making erroneous decisions while investing. Investment decisions that are sound and free from behavioral bias, would lead to better financial return, and achievement of investor’s investment goals. The sector-wise effect of investment bias will also help the investors in taking corrective measures.

Can Personality Traits, Risk Attitude, and Demographics Explain Fund Managers’ Disposition Effect?

This paper focuses on the extent to which personality traits, risk attitude, and demographics explain holding losses and cutting gains using survey data collected among equity and bond fund managers. For this purpose, cross-sectional multiple regressions were conducted. This paper argues that holding losses and cutting gains are two independent biases, rather than two sides of the disposition effect. The results show a significant effect of extraversion, openness, risk-taking, professional experience, and university degree on holding losses, and a significant effect of risk perception and gender on cutting gains. This paper contributes to few studies on personality traits and behavioral biases of professional investors, and it may have important practical implications in fund management companies.

The Ulysses option: Smoking and delegation in individual investor decisions

• Data of 19,336 brokerage clients with security transactions and account bookings. • Identification of smokers as empirical proxy of self-control failure. • Smokers are more likely to seek and follow financial advice. • Advice lowers smokers’ turnover while increasing diversification. • Advice works as an effective commitment for investors with low self-control. Are smokers more likely to seek and follow financial advice? We build on literature which shows that investors who smoke have self-control issues and trade impulsively. We empirically measure self-control failures by identifying cigarette addiction in a sample of German brokerage clients and show that smokers are more likely to delegate their decisions to financial advisors which work like a commitment device. Potential endogeneity issues and self-selection are addressed by using propensity score matching. Despite advisor incentives, such commitments work successfully in lowering overtrading, improving investment biases and increasing performance of low self-control investors.

EFFECT OF FINANCIAL LITERACY, RISK ATTITUDE AND SAVING MOTIVES TO DISPOSITION BIAS ON MUTUAL FUNDS INVESTORS

Investment is significant to prepare human needs in the future. To make investment decisions, investors will try to make their decisions as rationally as possible. However, one cannot deny that some irrational factors or biases also influence investment decision-making. This study examines financial literacy, risk attitude, and saving motives on disposition bias of mutual fund investors. The sample used is mutual fund investors, and the respondents themselves make decisions to sell or buy mutual funds. The total of respondents is 116 respondents. The regression method used in this study is binary logistic regression using SPSS software. This study found that financial literacy and risk attitude has a significant effect on disposition bias. Meanwhile, the variable saving motives have no considerable impact on disposition bias.

How industrial convergence affects regional green development efficiency: A spatial conditional process analysis

Industrial convergence is a key means to transform the economic mode. Taking the convergence of manufacturing and producer services in China as the research object, this study explored how industrial convergence affects regional green development efficiency (GDE). First, a coupling evaluation system was established to measure industrial convergence degree, and the directional distance function-based slacks-based measure was combined with the global Malmquist-Luenberger index to measure GDE. Second, we employed spatial econometric models to analyze the relationship between industrial convergence and GDE. Then, using the spatial conditional process analysis, a unified framework of green innovation, investment structure, and energy intensity was constructed to investigate the transmission mechanism involved. The results showed that: (1) Regional GDE and green innovation had a spatial dependence. (2) Considering the spatial correlation, industrial convergence is conductive to regional GDE. (3) Green innovation is an effective path by which industrial convergence improves regional GDE. (4) In this mediating process, the investment structure and energy intensity play a moderating role. The investment bias in high-tech industries increases the role of industrial convergence in promoting regional GDE and green innovation, while the moderating direction of energy intensity is opposite. In addition, there is a crowding-out effect in energy dependence, which hinders the effectiveness of green innovation.

The Momentum Gap and Return Predictability

Abstract The formation period return difference between past winners and losers, which I call the momentum gap, negatively predicts momentum profits. I document this for the U.S. stock market and find consistent results across 21 major international markets. A one-standard-deviation increase in the momentum gap predicts a 1.25$\%$ decrease in the monthly momentum return after controlling for existing predictors. This predictability extends up to 5 years for static momentum portfolios, consistent with time-varying investor biases. Following the simple real-time strategy of investing in momentum only when the momentum gap is below the 80th percentile delivers a Sharpe ratio of 0.78.

Smoking hot portfolios? Trading behavior, investment biases, and self-control failure

Self-control is a personality trait that explains undersaving and nonparticipation decisions. We show that self-control failure also affects trading behavior among individuals on capital markets. We use smoking as the most socially accepted example of self-control failure among 13,644 German brokerage clients and compare the trading behavior of 3,553 smokers and 10,091 nonsmokers. Smokers are associated with a higher portfolio turnover unexplained by financial sophistication or wealth effects. Self-control failure also exacerbates overconfidence, social contagion, sensation seeking, and attention grabbing. Overall, self-control failure is costly because it increases the gap between gross and net returns of smokers relative to nonsmokers. • Novel data of 13,644 bank clients with security transactions and account bookings. • Identification of smokers as empirically observable proxy of self-control failure. • Smokers have a 6.84% higher portfolio turnover per year. • Self-control failure exacerbates existing predispositions (e.g., overconfidence).

What Drives the Tail Risk Effect in the Chinese Stock Market?

In this paper, we reveal that in the Chinese stock market, the significant negative relationship between tail risk and expected returns only exists when excluding the bottom 30% market capitalization (small-cap) stocks, a finding that helps to reconcile the mixed result of the tail risk effect in China. In mechanism exploration, irrational biases of investors (including underreaction to bad news, preference for tail risk of stocks in capital loss, and overoptimism) and limits to arbitrage in the market may induce the negative tail risk effect in the Chinese stock market. In addition, we also find that implementing the margin trading system reduces the tail risk and suppresses the negative tail risk effect for target stocks.

The Liability of Gender: Examining Investment Gaps in Male- and Female-led nascent social ventures

While most empirical evidence suggests that male-led ventures raise more financing than female-led ventures due to investor biases, these studies primarily focus on commercially-oriented ventures seeking traditional forms of investment (debt/equity). In response, we draw on stereotype content theory and signaling theory to determine whether and how entrepreneur gender impacts nascent social ventures’ access to traditional and non-traditional (philanthropy) financing. Our results show that while female-led ventures do raise less traditional investment, they also raise more non-traditional investment than male-led ventures. However, a third-party endorsement signal increases female-led ventures’ disadvantage in traditional investment and eliminates their advantage in non-traditional investment

Impact of overconfidence bias in stock trading approach: a study of high net worth individual (HNI) stock investors in India

PurposeThe purpose of the study is to check whether Indian high net worth individual (HNI) investors are suffering from overconfidence bias in personal life and in-stock investment approach. The study is to benchmark an ideal behaviour that an investor should exhibit under the overconfidence bias.Design/methodology/approachBoth qualitative and quantitative methods were used to study the Indian HNI investors with overconfidence bias. As a first step, an exploratory study was conducted to identify the variables to define overconfidence bias. An extensive literature review along with in-depth interviews was conducted amongst investors, fund managers and the subject experts to check the content validity of the variables. The survey instrument was designed based on the objective of the study and theoretical framework. Both descriptive and inferential statistical tools such as the Z proportion test, logistic regression and structural equation model were applied to test the hypotheses.FindingsIt was found that there is a moderate impact of overconfidence bias amongst the investors both in normal life and whilst making investments in stock. This study found the influence of overconfidence bias in stock investment with respect to forecasting of the stock price movements, overtrading, overanalysis and overreaction.Research limitations/implicationsThis paper will help in understanding the Indian HNI investors’ behaviour under the impact of overconfidence bias. There is an empirical study to understand the implication of overconfidence bias on stock investors specifically for the HNI investors.Practical implicationsThis study gives an insight into the fund managers to understand the Indian HNI investment behaviour. It is also helpful for HNI investors to understand and correct their behavioural biases related to overconfidence.Social implicationsThis paper will guide investors to understand the symptoms and repercussions of overconfidence bias in stock investment. They can also realize the subtle impact of overconfidence bias in personal and professional life, thus preventing them from making losses.Originality/valueThis work is the extension of the works of Terrace Odean on behavioural finance in the Indian Stock Investors' context. The concept of overconfidence bias and its implications of finance were developed by Kahneman and Tversky, and later by other behavioural finance researchers such as Malmendier, Hirshleifer, DeBondt, Odean, Barber, Shefrin and others. This paper studies stock investing behaviour with specific reference to Indian HNI investors.

Investment in Stock Markets: A Survey of Behavioural Biases of Individual Investors

Investment in Stock Markets: A Survey of Behavioural Biases of Individual Investors

A STUDY ON EFFECT OF BEHVIORAL BIASES ON INVESTOR’S PREFERENCE REGARDING 80C TAX SAVING INSTRUMENTS IN SURAT CITY

Behavioural finance is a new theoretical field which seeks to apply the understandings of the psychologists to recognize the behaviour of both investors and financial markets. It concentrates upon how investor is aware and acts on information to take investment decisions and that their behaviours reason them to make changed Selection about their financial decisions. Investors do not act sensibly in taking verdicts relating to investment. They have positive weaknesses like cognitive and emotional which take a predominating function in taking investment decision of individuals. They have behavioral biases in the event of taking investment decision. In this present paper researchers examines “Effect of Behvioral Biases on Investor’s Preference Regarding 80C Tax Saving Instruments in Surat City.”. Researcher has studied behavioral biases of investors investing in 80C tax saving instruments by conducting the survey with sample size of 100 investors through a wellstructured questionnaire in Surat city. The sampling method used was convenient sampling through personal survey method by contacting investors of Surat city. The purpose of this study was to find out behavioral biases of investors while investing in tax saving 80C instruments in Surat City.

Social Trust and Institutional Investment Biases

Social Trust and Institutional Investment Biases

Parental Investment Is Biased toward Children Named for Their Fathers.

Namesaking (naming a child after a parent or other relative) can be viewed as a mechanism to increase perceived parent-child similarity and, consequently, parental investment. Male and, to a lesser extent, firstborn children are more frequently namesakes than female and later-born children, respectively. However, a direct link between namesaking and parental investment has not been examined. In the present study, 632 participants (98 men and 534 women) from Central Europe indicated their first name, sex, birth order, number of siblings, sexual orientation, socioeconomic status, paternal and maternal first names, as well as relationship quality with, and time and financial investment they received from, both parents during childhood. Mixed-effects models revealed associations between namesaking and parental investment. However, the effect of namesaking often appeared significant only in interaction with specific predictors, such as sex and primogeniture. It suggests instead that namesaking has an additive effect-it enhances the effect of biological factors on parental investment. In general, we found evidence for the bias in parental investment linked to name similarity among both parents, and support for the hypothesis that namesaking serves as a mechanism to increase paternity confidence and, thus, paternal investment. The effect of namesaking influences only certain types of parental investment-namely, those at the level of relationship quality. In addition, nonheterosexual orientation was the strongest negative predictor of paternal investment. Our study extends the research on parental investment by showing that cultural mechanisms, such as namesaking, can also exert some influence on parental rearing behavior.

Efficient Market Hypothesis During T he Time of COVID

This paper examines the efficiency of the Indian Stock Markets (NSE) during the time of COVID. It demonstrates the impact on the market on the announcement of two major events that is the declaration of COVID as a Public Health Emergency Of International Concern (PHEIC) on 30th January 2019 and the day when Prime Minister Narendera Modi declared first lockdown in India, 24th March 2019. The study uses the Event Study methodology to determine the efficiency of the markets. The study found that the markets were in fact inefficient during the period under study and that there were numerous opportunities to make abnormal profits. The study also conducted a sector wise comparison to analyze the impact of the above mentioned events and found a major difference in the way each sector was affected by the news, indicating different levels of efficiency in the semi strong form of market. The results of this research helps one to understand investor behavior and biases and the different opportunities one could make use of, in order to make abnormal profits.

Behaviour and biases of retail investors: Task or trait?

We ask to what extent task knowledge and tactics, or enduring personality traits, predict behaviour and biases in a stock trading setting. We base our study on an exceptionally wide-ranging dataset: responses to a self-report survey, together with transactional data of the same individual customers of a UK brokerage. From the survey we estimate measures of domain-general personality traits, such as the Big Five, and task-related measures of financial literacy, competency and attitude specific to trading. Our results show the dominance of task measures over trait measures, when predicting nine different dependent variables of investment performance, biases and portfolio activity. We argue that researchers into financial decisions should consider a rich set of explanatory factors.

Bonnie and Clyde Revisited: A Conceptual Model of the Behavior of the Instigators of the GameStop Short Squeeze of 2021

The efficient market hypothesis assumes that investors act independently, but social-media-enabled behavior among amateur investors demonstrably violates this assumption. This was dramatically illustrated by a recent short squeeze in the shares of GameStop. By analogy with conceptual models in the behavioral sciences, we outline a conceptual model attempting to explain the behavior of the participants, and explore some of the implications of this conceptual model for investors. This case study illustrates a systematic inefficiency in option pricing which only become apparent when extreme market conditions are encountered. Although the cognitive biases of amateur investors are of little importance for understanding stock prices, this is a special case where their cognitive biases do matter.