Behavioral Finance Biases in Investment Decision Making
International Journal of Accounting, Finance and Risk Management
Volume 5, Issue 2, June 2020, Pages: 69-75
Received: Sep. 11, 2019;
Accepted: Mar. 27, 2020;
Published: Apr. 14, 2020
Views 325 Downloads 572
Muhammad Atif Sattar, Department of Management & Economics, University of Science and Technology, Kunming, China
Muhammad Toseef, Department of Management & Economics, University of Science and Technology, Kunming, China
Muhammad Fahad Sattar, Department of Management & Economics, University of Science and Technology, Kunming, China
Follow on us
Traditional finance suggests that investments made by rational behaviors investors examine risk and return before decision making to gain maximum profit later behavioral finance challenge traditional finance and introduce psychological factors affect decision making. The aim of this research paper is to explore how behavioral biases affect investment decision making under uncertainty. Dependent variable investment decision making is a composite activity, it never be made in a vacuity by depending on personal resources. Based on this study investment choices alternatives influence by human rational and irrational behavior, therefore, examine the impact of behavioral finance in the decision-making process. Behavioral finance phenomenon variables; heuristic, prospects, personality characteristics, feeling, moods and ecological factors explore under this research. Overconfidence, Representativeness, Anchoring, Regret Aversion, Hindsight, Herding Effect and Home Bias included in investors psychology behaviors. Survey questionnaire tool used to collect sample to conduct quantitative research. To test the hypothesis Regression analysis run by the SPS software. Findings revealed that there was an effect of behavioral biases on investment decisions. Empirical results concluded investment decision making influenced by heuristic behaviors more than prospects and personality characteristics. The originality of this study, it is very beneficial for investors and financial institutions to make decision by observation of psychological factors.
Behavioral Finance, Decision Making, Heuristic, Prospects, Big Five Personality Characteristics
To cite this article
Muhammad Atif Sattar,
Muhammad Fahad Sattar,
Behavioral Finance Biases in Investment Decision Making, International Journal of Accounting, Finance and Risk Management.
Vol. 5, No. 2,
2020, pp. 69-75.
Copyright © 2020 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/
) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Acar, M. K. (2009). BEHAVIOURAL FINANCE AND THE STUDY OF THE IRRATIONAL FINANCIAL CHOICES OF CREDIT CARD USERS. Annales Universitatis Apulensis Series Oeconomica.
AKKAYA, C. U. (2013). THE MENTAL AND BEHAVIORAL MISTAKES INVESTORS MAKE. INTERNATIONAL JOURNAL OF BUSINESS AND MANAGEMENT STUDIES, 5 (1).
Anastasios KONSTANTINIDIS, A. K. (n. d.). FROM EFFICIENT MARKET HYPOTHESIS TO BEHAVIOURAL FINANCE: CAN BEHAVIOURAL FINANCE BE THE NEW DOMINANT MODEL FOR INVESTING? Scientific Bulletin – Economic Sciences, 11 (2).
Anwar, A. H. (2016). Impact of Behavioral Biases on Investment Decision; Moderating Role of Financial Literacy. SSRN.
BHATTACHARYA, R. (2012). BEHAVIORAL FINANCE: AN INSIGHT INTO THE PSYCHOLOGICAL AND SOCIOLOGICAL BIASES AFFECTING FINANCIAL DECISION OF INVESTORS. ZENITH International Journal of Business Economics & Management Research, 2 (7).
Brian M. Lucey, M. D. (2005). THE ROLE OF FEELINGS IN INVESTOR. JOURNAL OF ECONOMIC SURVEYS, 19 (2).
Daniel Kahneman, E. H. (1998). Aspects of Investor Psychology. Journal of Portfolio Management, 24 (4).
Dar, M. A. (n. d.). A CONCEPTUAL FRAMEWORK ON EMOTIONS AND INVESTMENT DECISIONS. NATIONAL MONTHLY REFEREED JOURNAL OF REASEARCH IN COMMERCE & MANAGEMENT, 1 (12).
Dr. V. Shanmugasundaram, D.,. (2011). IMPACT OF LIFE-STYLE CHARACTERISTICS IN INVESTMENT DECISIONS. INTERNATIONAL RESEARCH CONFERENCE AND COLLOQUIUM.
Ghayekhloo, S. R. (2011). Consequences of human behaviors’ in Economic: the Effects of Behavioral Factors in Investment decision making at Tehran Stock Exchange. International Conference on Business and Economics, 1.
Goyal, S. K. (2015). Behavioural biases in investment decision making – a systematic literature review. Qualitative Research in Financial Markets, 88-108.
Jacob Niyoyita Mahina1, W. M. (2017). Effect of Behavioural Biases on Investments at the Rwanda Stock Exchange. International Journal of Accounting, Finance and Risk Management, 131-137.
Kanan Budhiraja, D. T. (2018). IMPACT OF BEHAVIORAL FINANCE IN INVESTMENT DECISION MAKING. International Journal of Civil Engineering and Technology (IJCIET).
KANNADHASAN, M. (n. d.). ROLE OF BEHAVIOURAL FINANCE IN INVESTMENT DECISIONS.
Kumari, A. K. (2017). A STUDY ON IMPACT OF BEHAVIORAL FINANCE IN INVESTMENT DECISIONS OF SMALL INVESTORS. International Journal of Management Research and Business Strategy.
Malena Johnsson, H. L. (n. d.). Bahavioural finance and the change of investor behaviour during and after the speculation bubble at the end of 1990s.
Mwangi, G. G. (2011). Behavioral factor influencing investment decisions in the Kenyan property Market.
Nathalie Abi Saleh Dargham, C. d. (n. d.). The implications of Behavioral Finance.
Qureshi, S. A. (n. d.). Measuring Validity of the Determinants of Investment Decision Making. 2012.
Rasoul Sadi, H. G. (2011). Behavioral Finance: The Explanation of Investors’ Personality and Perceptual Biases Effects on Financial Decisions. International Journal of Economics and Finance, 3 (5).
Singh, S. (2012). Investor Irrationality and Self-Defeating Behavior: Insights from Behavioral Finance. The Journal of Global Business Management, 8 (1).
Thomas M. Zellweger, U. F. (n. d.). A behavioral perspective to financing decisions in family and nonfamily firms.