Impact Of Behavioral Biases Research Articles

The aspects of behavioral finance with new insights: an analysis of individual investors at Pakistan Stock Exchange (PSX)

PurposeThe cognitive biases exhibited by investors could hinder their capacity for logical reasoning and impact their perception and reaction to information when making financial choices. So, this study was done to identify the behavioral biases that hinder investors' sound decision-making at the Pakistan Stock Exchange (PSX).Design/methodology/approachA cross-sectional study was undertaken employing a causal research design approach. Questionnaires were administered to individual investors of the PSX as the data collection methodology. The data were subsequently analyzed through the utilization of the Smart PLS Structural Equation Modeling (SEM) technique.FindingsThe results suggest that information factors and cognitive biases, namely home bias, geographical bias, investor sentiment, salience, and over/under reaction have a positive association with the investors' choices at PSX.Research limitations/implicationsThe study’s emphasis is on the impact of behavioral biases on individual investors only, even though such biases also influence the investment decisions of institutional investors.Practical implicationsThe study holds implications for scholars engaged in the field of behavioral finance as well as professionals involved in the stock market, particularly those interacting with individual investors and personal finance. Additionally, the current study will take into account investors, financial advisors, practitioners, policymakers, investment experts, stakeholders or target groups, etc. to support various groups in their professional activity and to help them overcome such biases that influence their sound decision-making power.Originality/valueThe innovative aspect of this research is its ability to advance the understanding of the conceptual underpinnings and social structure of behavioral biases by critically analyzing the body of prior research and adding value to the existing body of literature on behavioral finance in Pakistan by investigating the combined impact of never-studied variables, i.e. geographical bias and information variables, understudied behavioral variables, i.e. home bias and salience and studied variables, i.e. investor sentiment and over/under reaction on individual investor investment decisions at PSX.

An Impact of Behavioral Bias on Investment Decision Making of Individual Investors

Behavioral finance has gained increasing prominence in understanding the role of psychological factors in shaping investment decisions. This study aims to investigate the impact of various behavioral biases on the investment decision-making process of individual investors. Specifically, it examines the prevalence and influence of biases such as confirmation bias, loss aversion, herding behavior, overconfidence, and regret aversion among individual investors. The study employs a quantitative approach, collecting data through a structured questionnaire from a sample of 201 individual investors. Descriptive statistics, correlation analyses, chi-square tests, and reliability measures are utilized to analyze the data and assess the relationships between behavioral biases, demographic factors, investment characteristics, and investment decisions. The findings reveal that behavioral biases are prevalent among the respondents, with varying degrees of influence on their investment decisions. Significant associations are observed between certain biases and factors such as annual income, percentage of investment from savings, frequency of investments, and investment types. For instance, individuals with higher incomes exhibit slightly more loss aversion tendencies, while those investing a higher percentage of their savings tend to demonstrate greater confirmation bias. The study contributes to the understanding of behavioral finance by providing empirical evidence on the impact of various biases on individual investors' decision-making processes. It highlights the importance of recognizing and mitigating these biases to promote more informed and rational investment decisions. The findings have implications for individual investors, financial advisors, and policymakers in developing strategies to enhance investment decision-making and overall financial well-being.

The Impact of Behavioural Biases on Individual Investors' Decisions: an Exploratory and Confirmatory Analysis

The Impact of Behavioural Biases on Individual Investors' Decisions: an Exploratory and Confirmatory Analysis

Impact of Behavioural Biases on Investment Performance: A Comparative Analysis of Investors from India, USA and UK

This study presents evidence towards the existence of behavioural biases while analysing the impact of such biases on the investors’ investment performance in India, the USA, and the UK. Further, the study aims to investigate the moderating role of financial literacy on the relationship between behavioural biases and investment performance. It reveals that behavioural biases like affect heuristic, herding and status quo positively impact the investors’ investment performance amongst Indian investors whereas loss aversion, overconfidence, availability, and representativeness biases positively impact the investors’ investment performance amongst UK investors; and affect heuristic bias amongst USA investors. The findings divulge the negative impact of anchoring bias and mental accounting amongst Indian investors; availability bias, disposition effect, and overconfidence bias amongst USA investors; and affect heuristic and herding amongst UK investors. The study finds that a few of the behavioural biases impact investment performance positively, though less often. Hence investors should be cautious as these biases generally lead to irrational decision-making and might adversely influence the investors’ investment performance in the long run. The study further concludes that financial literacy significantly moderates the relationship between anchoring bias and individuals’ investment performance in India and affect heuristic in the USA. Interestingly, in the UK scenario, no significant moderating impact of financial literacy was found between any of the behavioral biases and investment performance.

Impact of Behavioral Biases on Investment Decision Making: Evidence from the Review of Literature

Impact of Behavioral Biases on Investment Decision Making: Evidence from the Review of Literature

Impact of Behavioral Biases on Investment Decision Making: Evidence from the Review of Literature

Impact of Behavioral Biases on Investment Decision Making: Evidence from the Review of Literature

The impact of behavioural biases on the behaviours of informed and uninformed individual stock investors: the case of the Egyptian Stock Exchange.

The impact of behavioural biases on the behaviours of informed and uninformed individual stock investors: the case of the Egyptian Stock Exchange.

Do CEO Behavior Biases and Personal Traits Influence ESG Performance? The Evidence from Emerging Capital Market of Russia

The impact of behavioral biases and personal traits of the CEO on corporate decisions and performance has become the important agenda for management, governance and finance research. But still the empirical evidence on the influence of behavioral biases on the implementation of sustainability principles into company’s strategies is missing not only inemerging markets, but for developed markets as well. We aim to fulfill this gap by findings on the role of behavioral characteristics of a CEO and how they affect the effectiveness of the ESG (Environmental, Social and Corporate Governance) approach to company management in one of the largest emerging capital market of Russia. We first focus on CEO’s optimism,narcissism, self-confidence, and the lack of confidence of the CEO and their impact over ESG performance. To identify behavioral biases, we use textual analysis and the “bag of words” method applied to the written letters to the shareholders by CEOs of Russian companies in 2017–2019 on a sample of 38 companies with official external ESG ratings.
 Our results confirm a significant influence of optimism and narcissism on the effectiveness of the ESG approach, but self-confidence does not appear to be statistically significant. Moreover, our findings prove significance of some personal traits such as industry experience and technical educational background. Our findings validate and complement prior research on personal characteristics of CEOs and provide novel data on the impact on ESG in emerging capital markets.

Review paper on impact of behavioral biases in financial decision- making

Traditional finance is constructed on four principles which are portfolio principles of Markowitz, the arbitrage principles of Miller and Modigliani, the capital asset pricing model of Sharpe, Lintner and Black and the option-pricing model of Black, Scholes, and Merton, These principles conclude that the market is efficient and competent. Patrons of traditional finance recommend that individual behavior frequently reflect rationality. EMH of Samuelson also explains that people behave rationally, maximize their expected utility and process all available information. EMH states that stock prices reflect all the available information. It is impossible to “beat the market” consistently on a risk adjusted basis since market price should only react to available information. Proponents of traditional finance state that the market and investors who access the market are rational. But in reality investors cannot act rationally all time. They are frequently influenced by psychological factors like state of mind, emotions, trading theories, values and interpretation of information, which mislead them to act as irrational investors, (Kahneman and Tversky). Daniel Kahneman and Amos Tversky were known as the fathers of behavioural finance. Though, many literary works are carried out by them in behavioural finance. Proponent were advocate that investors behavior influence by psychological bias. From the above findings, it concludes that Most of the standard finance theories give more importance to fundamental factors instead of give importance to decision making process of individuals. Therefore, there is necessitating developing modern finance to study these irregularities. The main aim of this paper is to study how psychological factors influence the investment behavior of individuals through review of literature from secondary sources like Journals, Magazines, Books etc. The study also has tried to discover the relationship between the behavioral biases and the investment decisions of the individual investors of stock market. The result of the study will help investors to improve their decision making process through identifying the most important behavioural finance factor.

Review paper on impact of behavioral biases in financial decision- making

Review paper on impact of behavioral biases in financial decision- making

Impact of behavioral biases on investment decision making and mediating effect of risk perception

Impact of behavioral biases on investment decision making and mediating effect of risk perception

A Study on the Impact of Behavioral Biases on the Investment Pattern of Indian Retail Investors with A Reference to Millennial Generation

The development of a nation’s economy is significantly influenced by the capital market, which aids in wealth accumulation and capital raising. Today’s generation has a variety of financial instruments, which has given individual investors access to a wide range of investment opportunities. Behavioral finance is one the emerging topic in field of finance, it helps in understanding psychological behaviour of investors. This study focuses on understanding these behaviour and their impact on investment decision. A special reference is given to millennial generation as they are the maximum contributors of total retail investors. The objective of this study is to understand the investment pattern of these millennial retail investors and how they are affected by various behavioral biases. The study is analytical in nature. Research design used in this study is exploratory. The primary data is collected through a structured questionnaire from 100 millennial retail investors of Indian stock market. The collected data is analysed using different statistical tools. The findings of this study reveals millennial retail investors’ purpose of investment, factors considered before investing, amount of experience, area of investment, average return and impact of investment biases.

Impact of Behavioural Biases on Investment Decision Making: A Review Study

Behavioural finance believes that at times, investors may distort from rationality which affects their decision making. This paper attempts to examine the major behavioural biases so that it can provide us with information related to human psychology, explaining the errors committed by investors while making market-related predictions. It explores the impact of behavioural finance on investment decision-making and compiles related concepts from financial economics, psychology, and sociology concerning building up an extra detailed model of human behaviour in the financial markets. The study also highlights major biases and their implications for the investment decision-making of retail investors.

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.

Impact of Behavioral Biases in Financial Risk Tolerance Ability of Mutual Fund Investors

Objective: The Behavioral bias is the term that deals with the investors’ psychology about their investment decision with their investment expertise. Every individual is biased, according to standard economic theory by his behavior and experiences which are rational. Methods: This research seeks to segregate mutual fund holders into various groups (persons and professionals) based on Behavioral biases and then investigates whether these Behavioral biases are influencing the level of knowledge of investors and the financial risk tolerance of certain mutual funds. Statistical tools compare investors characteristics and analyse how Behavioral biases are associated. Results: The factors analysed are financial circumstance, Type of Investors, Asset class preference, Time Horizon and Purpose of Investment. The primary information was gathered from 250 Central India mutual fund investors dependent on Judgment sampling. CFA, Correlation, MANOVA and Regression. Conclusions: Findings shows the effect of the behavior bias has positive impact on mutual fund investor awareness and financial risk tolerance.

A STUDY ON IMPACT OF BEHAVIOURAL FINANCE ON INVESTMENT DECISION OF SINGLE PARENTS IN SOUTH ASIAN COUNTRIES

The purpose of this study is to find out the possible impact of behavioural finance on the investment decision of a single parent. As being an earning/working single parent who usually does not have other possible sources in their family, the decision which they take must be a reliable one and cannot afford to get a second chance. In the study, this study is also one of an effort to assess the impact of behavioural biases in the investment decision-making of a single parent. A questionnaire is designed and responses are collected from 203 respondents who prefer to invest where the level of risk is either low or moderate and are more concerned about losses in their investment than substantial gain. Also, most of the respondents were investing in order to meet some specific purpose, for their retirement plan as well as to educate their children. This study concludes by stating that investors’ risk-taking capacity is dependent on their level of income and the sources of income. Although every Individual is subject to some biases, they tend to think more rational way than an average investor in many ways as they know about their requirements and the investment they make.
 JEL Classification Codes: G40, G41.

Can Momentum Be Explained by Fund Flows or Disposition Effect? The Impact of Behavioral Biases and Capital Flows in Brazilian Market Movements

Momentum is one of the most robust anomalies in financial markets, there are two main recent explanations for this phenomenon, a behavioral-based explanation through disposition-effect (i.e., the willingness to sell “winners” too quickly and to hold “losers” for a long time) and a fund-flow based explanation. The disposition-effect explanation is centered in the convergence of the spread between the fundamental value and the observed market price (disposition-effect causes an underreaction to news that generates this spread), and the fund flows-based explanation is due to the persistence of the performance of mutual-funds (which usually keep buying winning positions and selling the losses). This paper compares those theories using Brazilian data (which is suitable for the strong presence of momentum). The empirical analysis was done using Fama-MacBeth regressions with results pointing the disposition-effect explanation as the most significant, with the robustness analysis contributing positively to the main findings.

Impact of behavioural dispositions on risk endurance of individual investors: an application of multiple discriminant analysis

For the rapid development of an economy, investment of excess funds is essential. But in today's dynamic environment, individual investor's decision-making is influenced by several factors such as behavioural dispositions, where emotions play a crucial role in investing. Further, investment decisions are also influenced by the risk-tolerant behaviour of investors. The present study attempts to know the impact of behavioural biases on the risk endurance level of investors. For the study, a sample of 720 individual investors has been taken from it, 600 investors have responded from the state of Rajasthan. A structured questionnaire has been prepared to include statements of investors' behavioural biases and risk-taking ability. The analysis has been done using the technique of Multiple Discriminant Analysis. It has been concluded that behavioural biases impact the risk-taking capacity, and further investors have been categorised into three groups viz. Risk Intolerant investors, Conservative moderate investors and rational confident investors.

Impact of Behavioral Biases on Investment Performance in Pakistan: The Moderating Role of Financial Literacy

This study aims at understanding the relationships of certain behavioral biases with the investment performance, and identifies the moderating role of financial literacy upon these hypothesized relationships. Data is collected through questionnaire from the investors trading at Pakistan Stock Exchange (PSX). Structured Equation Modeling (SEM) is used to analyze the data with the results that only anchoring and overconfidence biases have significant effects on investment performance. The results also show that presence of financial literacy does not play any role in improving the performance of investors. Majorly, findings of current study contribute by testing the moderating role of financial literacy between the behavioral biases and the outcome of investment decisions and thus expected to be useful for investors and policy makers.

Impact of Behavioral Biases on Investment Decision Making with Moderating Role of Financial Literacy

The objective of this study is to examine the Impact of Overconfidence bias and Herding bias on Investment Decision Making with Moderating Role of Financial Literacy. The population was Investor, Employee and Graduate Student. A sample of 200 was selected using convenience technique. Data were collected through structure questionnaire adopted from different papers. Correlation and Regression analysis were performed to examine the result. The Results show that overconfidence bias and herding bias have a positive impact on investment decision making and Financial Literacy has positive impact on investment decision making. Based on the results and discussions of the study findings as well as the limitations, theoretical and practical implications of the study have been provided.