Irrational Decisions Research Articles

The Impact of International Financial Reporting Standards on Aggressive Accrual: Evidence from Saudi Security Exchange

Purpose: This study investigated the impact of international financial reporting standards on aggressive accrual. The distinguishing feature of this research is the study of the recent adoption of international financial reporting standards in one of the most important economies and emerging markets in the world; the Saudi Security Exchange (Tadawul). Theoretical framework: One important issue that has dominated accounting research for many years is the mandatory IFRS adoption. More specifically, the impact of mandatory IFRS adoption on accounting figures, notably accruals. Most of the studies document mixed effects resulting from IFRS adoption. Design/methodology/methodology: This study focuses on Kingdom of Saudi Arabia's Financial Market due to the recent mandatory adoption of the IFRS by Saudi companies in 2017, using 781 firm-year observations. Our study sample will cover 6 years from 2014-2019, three years before adoption (2014-2015-2016) and three years after adoption (2017-2018-2019). Find: The findings of this study were consistent with previous accounting literature. The study shows a decrease in aggressiveness accruals after adopting international financial reporting standards. The study concluded that the companies listed on the Saudi Stock Exchange (Tadawul), especially after the adoption of international financial reporting standards, do not often provide inflated financial reports with distractions that could lead to customers making irrational decisions. Research, practical and social implications: This study put a spotlight on Aggressive Accrual resulting from mandatory IFRS adoption in emerging markets, such as the Kingdom of Saudi Arabia's Financial Market. Therefore, this study provides an exciting opportunity to advance standards setters’ knowledge of the quality of financial reporting in emerging markets. Originality/value: This is the first study to use Aggressive Accrual around mandatory IFRS adoption. worth noting that apart from the prior literature, no study was devoted to the aggressive accrual in the Kingdom of Saudi Arabia's Financial Market.

The Influence of Cognitive Bias on People's Online Shopping Decision

Since China initially established a simple online shopping model in 1999 and experienced 20 years of a long development, people should have accumulated a lot of online shopping experience. However, people will still make many irrational decisions. From the perspective of behavioral economics, this paper considers more factors regarding the assumption of a "rational person" in traditional economics, breaks the shortcomings of conventional assumptions, and more systematically explains many economic phenomena. It enables people to avoid the same mistakes and maintain relative rationality after understanding the economic phenomena contained in the irrational decision-making of online shopping. In order to achieve this goal, this paper will list several representative cognitive biases and link them with various irrational online shopping behaviors so that people can understand how these irrational behaviors produce and affect people. Finally, this paper finds that when people make decisions, they are often affected by the "field dependence" of external information and the "field independence" of people's hearts. What people can do is accumulate knowledge reserves and keep relatively rational when making similar decisions in the future.

Financial Literacy and Impulsivity: Evidence from Japan

The existing literature considers financial literacy to be a proxy for rational decision-making instruments. Although there is empirical evidence on the impact of financial literacy on improving rational decision-making ability, it is not yet known whether financial literacy reduces irrational decisions. Impulsive decisions are a form of irrationality where people prefer smaller but earlier rewards over larger but delayed rewards. Thus, impulsive decisions lead to suboptimal decisions in terms of utility gain. This study investigated whether financial literacy reduces impulsivity in financial and economic decisions. We use data from the Preference Parameter Study (PPS) of Osaka University. We measure hyperbolic discounting as a proxy for impulsive decision making. To control for the endogeneity bias between financial literacy and hyperbolic discounting, we use childhood experiences of talking about finances with parents as an instrumental variable. Our probit regression results show that financial literacy is negatively associated with hyperbolic discounting, after controlling for endogeneity bias. Furthermore, we observed that the effect was significant among respondents aged over 40 and among female respondents. Our results suggest that authorities should consider using financial literacy as an alternative policy intervention to change impulsivity preferences.

Does cognitive biased knowledge influence investor decisions? An empirical investigation using machine learning and artificial neural network

Purpose Current research in the field of behavioural finance has attempted to discover behavioural biases and their characteristics in individual investors’ irrational decision-making. This study aims to find out how biases in information based on knowledge affect decisions about investments. Design/methodology/approach In step one, through existing research and consultation with specialists, 13 relevant items covering major aspects of bias were determined. In the second step, multiple linear regression and artificial neural network were used to analyse the data of 337 retail investors. Findings The investment choice was heavily impacted by regret aversion, followed by loss aversion, overconfidence and the Barnum effect. It was observed that the Barnum effect has a statistically significant negative link with investing choices. The research also found that investors’ fear of making mistakes and their tendency to be too sure of themselves were the most significant factors in their decisions about where to put their money. Practical implications This research contributes to the expansion of the knowledge base in behavioural finance theory by highlighting the significance of cognitive psychological traits in how leading investors end up making irrational decisions. Portfolio managers, financial institutions and investors in developing markets may all significantly benefit from the information offered. Originality/value This research is a one-of-a-kind study, as it analyses the emotional biases along with the cognitive biases of investor decision-making. Investor decisions generally consider the shadowy side of knowledge management.

The group decision-making evolution of green consumption behavior under overreaction: Based on multi-agent simulation analysis

Promoting green consumption behavior is an effective means to promote sustainable development. Previous studies have not considered the irrational decisions of residents under the influence of complex internal and external information, so this study introduces overreaction theory into a multi-agent simulation model. The results show that (1) Greater economic profit and government incentive can encourage green consumption behavior decision and are conducive to the stability of group decision state. (2) When the difference between the consumption cost of green and general consumption is too large, the group with low initial adoption rate will evolve to another decision state. And environmental loss has little effect on green consumption behavior. (3) The stronger the overreaction of consumers to green consumption, the greater the volatility of group decision-making, but also the greater the probability choosing green consumption behavior. These findings provide a theoretical reference for the formulation of related policies.

Differential replay of reward and punishment paths predicts approach and avoidance

Neural replay is implicated in planning, where states relevant to a task goal are rapidly reactivated in sequence. It remains unclear whether, during planning, replay relates to an actual prospective choice. Here, using magnetoencephalography (MEG), we studied replay in human participants while they planned to either approach or avoid an uncertain environment containing paths leading to reward or punishment. We find evidence for forward sequential replay during planning, with rapid state-to-state transitions from 20 to 90 ms. Replay of rewarding paths was boosted, relative to aversive paths, before a decision to avoid and attenuated before a decision to approach. A trial-by-trial bias toward replaying prospective punishing paths predicted irrational decisions to approach riskier environments, an effect more pronounced in participants with higher trait anxiety. The findings indicate a coupling of replay with planned behavior, where replay prioritizes an online representation of a worst-case scenario for approaching or avoiding.

Herding as behavior investing: A bibliometric analysis

<p>Behavioral investing seeks to understand and exploit psychological biases in financial decision-making. It is based on the idea that investors are often influenced by psychological factors such as emotions, heuristics, and social norms, which can lead to systematic errors in judgment. These biases can cause investors to make irrational or suboptimal decisions, which can have negative consequences for their financial well-being. Behavioral investors aim to identify these biases to make more rational and profitable investment decisions. This research using bibliometric analysis from 246 article was published in a reputable (SCOPUS), peer-reviewed journal that is included in an index of scholarly literature. Bibliometric analysis is a method of analyzing and quantifying the characteristics of a set of publications, to study the trends and patterns in the existing research on herding behavior. Based on the research reviewed, it appears that herding behavior is a complex phenomenon that is influenced by various factors, including psychological biases, environmental conditions, and market conditions. It is often studied in the context of behavioral finance and investor behavior, and is relevant to the study of market efficiency and capital markets.</p><p> </p>

이해충돌방지제도의 정책결정과정에 관한 연구

The purpose of this study is to analyze the factors influencing the process of enacting the Conflict of Interest Prevention Act using the combined model of the Multiple Streams Framework and the Advocacy Coalition Framework to explore which factors are decisive factors in the policy process and lead irrational decisions.
 According to the study, the dynamic variables of the ACF consist real estate explosion, LH scandal, and 4.7 by-elections, and they operated as the main streams of the MSF. The real estate explosion, Sohn Hye-won and Park Deok-heum scandals, LH scandal, and the political flow of 4.7 by-elections combined to open the policy window. Opening the policy window, legislation was made through the activities of the Advocacy Coalition and Policy Entrepreneurs who obtained the driving force, but it contain problems - effectiveness of conflict of interest management for member of the National Assembly and heads of institutions, authority to manage conflict of interest divided by the Ministry of Personnel Management and the ACRC, and other issues of effectiveness of system operation, etc. - as the legislation was made quickly as it was caught up in the political schedules and the public anger.
 This study shows that meeting the accumulated streams of problems and political streams is a necessary factor in policy process and that preparation of policy streams, which are policy alternatives, is necessary. In addition, it presents that if policy alternatives, belief systems, and policy advocacy coalition are not prepared, they can fail at a mere level even if they are legislated.

Detecting the Herding Behaviour in the South African Stock Market and its Implications

Herd mentality is associated with financial market bubbles and crises and is not a new concept. Despite the dotcom bubble in the late 90’s and the recent real estate bubble, investors still have the tendency to see irrational decision as rational. Thus the aim of this study was to investigate the presence of herding in the Johannesburg stock exchange during the Covid-19 pandemic. Studies conducted in other markets have detected the presence of herding which sends strong signal of issues that may arise in financial markets. Using a sample period from 02 January 2020 to 31 December 2021 and a cross sectional absolute deviation as an analysis tool, the findings reveals a significant presence of herding in the Johannesburg stock exchange. The main implications to this finding is that momentum investing strategies is more suitable for the Johannesburg Stock exchange and exploring past price movements may provide valuable insights on expected future price movements

Factors influencing acceptance of Robo-Advisors for wealth management in Malaysia

Since the 2008 global financial crisis, many innovations have emerged in the financial sector as investors started to look for alternative methods to eliminate irrational decision-making in wealth management, and Robo-advisors is among those. Nine years after the first launching of Robo-advisors in the U.S. in 2008, the Securities Commission Malaysia has been issuing licenses to seven Robo-advisor platforms. The current COVID-19 outbreak has made this industry more in demand, increasing 763% in registration in 2020. However, much skepticism about Robo advisors’ ability and reliability in providing a similar quality or better advisory service compared to human-financial advisors. Therefore, this study examines the factors influencing the acceptance of Robo-advisors in wealth management in Malaysia. Adopting some factors from various established technology acceptance models, an online survey with 122 respondents was conducted using convenience sampling. Findings show that Relative Advantage, Effort Expectancy, and Social Influence significantly positive influence the Malaysian Behavioral Intention to Accept Robo-Advisors. On the contrary, there is no significant relationship between Perceived Risk and Malaysian Behavioral Intention to Accept Robo-Advisors. The study provides a positive insight into factors influencing the acceptance of Robo-Advisors in Malaysia.

Investigation into the International Financial Reporting Standards 9 model flaws exposed during the pandemic

Orientation: Market events during the coronavirus disease 2019 (COVID-19) pandemic exposed flaws in the econometric models used to derive International Financial Reporting Standards (IFRS) 9 impairments. Models were unable to capture the level of government intervention or predict the economic recovery process because of the unprecedented nature of the pandemic.Research purpose: This study examines the causes of the challenges experienced with the IFRS 9 models during the pandemic and approaches to minimise this risk in the future.Motivation for the study: Structural correlation breaks forced banks to replace the IFRS 9 models with expert overlays or rapidly rebuild the models to reduce impairment volatility and manage the impact on earnings. Expert judgement may lead to biased outcomes.Research approach/design and method: Behavioural finance theory suggests that emotion and cognitive biases often lead to irrational investment decisions with disastrous consequences to the market. The link between market sentiment and economic outcomes is tested with natural language processing. Archimedean copulas are used to compare the dependence structures of market variables between different stress periods.Main findings: Market sentiment is closely related to the trends observed in major macroeconomic indicators. The nature of the dependence structures differs between stress periods.Practical/managerial implications: Sentiment may be a valuable exogenous variable to incorporate into economic forecast models. Learnings from one stress period are not necessarily applicable to another.Contribution/value-add: Government intervention and market sentiment had a significant impact on the economic outcomes and correlation breaks observed during the pandemic. Developing bespoke models for the different phases of the economic cycle may not necessarily lead to improved outcomes.

Research on the Mechanism of Framing Effect Leading to Irrational Decision Making

The framing effect is the comprehension and evaluation of diverse ways of behaving by people when facing distinct options that were expressed with identical meanings, which will cause irrational decisions to happen while people are facing situations with the framework. And analyze the problems. In addition, there are not many papers covering both the mechanism and suppression methods of the framing effect at the same time, so this study attempts to fill in the gaps by studying relevant cases. This study aims to link causality and explain the flow of action of the framing effect by studying the mechanism by which the framing effect causes bias and the effects of reducing or addressing bias, and the research can conclude that people could debias the framing effect by using logical thinking or getting advice from other peoples who are a party to the framing effect.

Factors Contribute to Irrational Consumption Behaviors of College Students under New Consumption Environment

From the beginning of human society, economy is always the most vital component and principle of this society. It is well-known that the troika for economy growth is “consumption, investment, and export”. For most countries, consumption is the prior in these three factors. For the biggest economy, United State, consumption occupies ranging from 76.68% to 85.13% from 1960 to 2020 for the total GDP growth. Under the rapid development of society and technology, there are more and more factors contribute to people’s decision making, especially in consumption: advertisement, social media, education, peer comparison, etc. For college students, who is in a phase that their view towards consumption and decision is forming and developing rapidly, they would be easily influenced by some extroverted factors and make irrational decisions.Irrational decision would lead to problems in different extent. From individual perspective, irrational decision may lead to impulse consumption and regrets afterward. From macro perspective, irrational consumption would make people overconsume the products they do not really need, and further cause under allocation of resources.

An embodied and cognitive model of figther pilot high level air-to-air engagement decision

The development of pilot models has been a long-standing interest in cognitive modeling and AI due to the potential gains they offer in aerial robotics. In this study, a cognitive and embodied fighter pilot model is developed to obtain pilot-like characteristics for making high-level decisions in air-to-air engagements, using spiking neurons in ensembles implemented in the Neural Engineering Objects (NENGO) framework (Bekolay et al., 2014; Eliasmith, 2015). One major problem that is faced when creating such complex decision models is factoring the effect of the human agent’s affective state into the model, where emotional aggression may lead to irrational decisions. To address this need, inputs representing affective states that can influence the other subnetworks were included in the model. The NENGO framework also allowed for the use of Semantic Pointers, which allowed the numerical outputs of the spiking neuron ensembles to be expressed verbally as a semantic output. The inputs, final outputs (decisions), and intermediary decisions of the model were then evaluated by real-life warfighter pilots to assess the accuracy and validity of the model.

투자자 심리지수와 투자자의 비합리성에 관한 연구

Previous studies in the field of behavioral finance suggest that investors’ irrational behavior induces the difference between stock price and fundamental value. Uninformed investors with cognitive biases tend to make irrational investment decisions, such as herding, overconfidence, and loss aversion, rather than rational investment decisions. To find that mispricing is caused by investors’ irrational behavior, many studies focus on suggesting investor sentiment indicators constructed using surveys, transaction data, and textual data. We systematically review the literature regarding investor sentiment indices depending on the type of data and discuss the limitations of each index. Based on such limitations, we suggest ways to improve the measurement of each sentiment indicator.

IDENTIFICATION OF BEHAVIORAL FACTORS AND JUSTIFICATION OF THEIR ROLE IN DECISION-MAKING BY ENTITIES OF ENTREPRENEURIAL ACTIVITY IN CONDITIONS OF CONDITIONS

The purpose of the article is to identify behavioral factors and justify the role in management decisions by business entities in the context of the COVID-19 pandemic. Method. The following methods were used to conduct the study: abstract-logical, comparative analysis, graphic a visualization, statistical. Results. Based on the analysis, the peculiarities of the entrepreneur's behavior were clarified – his tendency to excessive self-confidence and optimism. Changes in business behavior in the context of the COVID-19 pandemic: losses at the beginning of the quarantine restrictions, when choosing the option of "closing the business" or "suspending" entrepreneurs under the influence of numerous behavioral factors (fear, illusion of control, trap effect, effect sorry) usually stop pedat the latter. The business found it self in a trapofinertiaanddidnotwanttoredistributebudgetsandfinancenewareas, instead try in gtore viveunprofi table. Scientific novelty. Behavioral factors of managerial decision-making by business entities in conditions of uncertainty have been identified by identifying the main components: cognitive prejudices, emotions, framing. Practical value. Studying the behavior of entrepreneurs in conditions of uncertainty avoids irrational decisions and their negative consequences.

Impairment and Control: Bilateral Relationship between Alcohol Use Disorder and Working Memory

Alcohol use disorder (AUD) is a common addictive psychological disease in modern society. AUD can induce a cluster of health and working memory (WM) problems, including Korsakoff's syndrome, irrational decision-making, impaired executive function, and impulsivity. Neuropsychological evidence shows that prefrontal cortex (PFC) function is impaired in AUD patients and their dopamine (DA) level is unstable. The present essay aims to discuss the relationship between AUD and WM from three points of view. Firstly, the behavioral and neuropsychological deficits of AUD subjects were summarized and categorized in detail. Secondly, the potential mechanism of WM impairment is discussed. Thirdly, various kinds of neuropsychological and behavioral treatments for AUD were critically reviewed and evaluated. While the pharmacological treatment was supported by various empirical studies and validated in different subtypes of AUD, the emerging behavioral therapy was revealed to be more secure and side-effect free than traditional medications.

Examining the Causes of Irrational Food Buying and Delaying Gratification as a Solution

Impulsive food buying resulting in waisted items and emotional regrets is regarded as biased buying behaviours through irrational decision making. Extensive previous research has brought forward projection bias, associative memory and episodic foresight, emotions and impulsivity, affective forecasting, and physical arousal as some of the contributors to the tendency to pursue immediate rewards of thrill and satiation over delayed and long-term fulfillment. The present study focuses on the causes of this phenomenon from the psychological perspective, identifying various internal and environmental factors and their relevance based on evidence of past research. It closely compares the Rational Choice Theory with actual shopping behaviours and challenges a fixed definition of objectivity and rationality in decision making. It then attempts to make connections between the cognitive causes of irrational decision making and immediate gratification, suggesting that postponing gratification may help with making more rational decisions when browsing for foods.

Pengaruh Bias Perilaku terhadap Pengambilan Keputusan Irasional dengan Financial Literacy sebagai Pemoderasi

This study aims to examine the effect of status quo bias, regret aversion bias, loss aversion bias and availability bias on irrational investment decision making by investors in Malang City moderated by financial literacy. The number of respondents as many as 87 people came from a group of investors from several securities offices and community groups of Beginner Stock Investors (ISP) Malang City. This study uses moderated regression analysis as a test tool. The results of this study indicate that regret aversion bias and loss aversion bias have a positive effect on irrational investment decision making, while the status quo bias and availability bias have no effect on irrational investment decision making. The moderating variable of financial literacy weakens the effect of availability bias on irrational investment decision making, but does not weaken the effect of status quo bias, regret aversion bias, and loss aversion bias on irrational investment decision making.

Gazing through the bubble: an experimental investigation into financial risk-taking using eye-tracking

Eye tracking can facilitate understanding irrational decision-making in contexts such as financial risk-taking. For this purpose, we develop an experimental framework in which participants trade a risky asset in a simulated bubble market to maximize individual returns while their eye movements are recorded. Returns are sensitive to eye movement dynamics, depending on the presented visual stimuli. Using eye-tracking data, we investigated the effects of arousal, attention, and disengagement on individual payoffs using linear and nonlinear approaches. By estimating a nonlinear model using attention as a threshold variable, our results suggest that arousal positively influences trading returns, but its effect becomes smaller when attention exceeds a certain threshold, whereas disengagement has a higher negative impact on reduced attention levels and becomes almost irrelevant when attention increases. Hence, we provide a neurobehavioral metric as a function of attention that predicts financial gains in boom-and-bust scenarios. This study serves as a proof-of-concept for developing future psychometric measures to enhance decision-making.