International Journal of Accounting, Finance and Risk Management

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Behavioral Finance Biases in Investment Decision Making

Received: Sep. 11, 2019    Accepted: Mar. 27, 2020    Published: Apr. 14, 2020
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Abstract

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.

DOI 10.11648/j.ijafrm.20200502.11
Published in International Journal of Accounting, Finance and Risk Management ( Volume 5, Issue 2, June 2020 )
Page(s) 69-75
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Behavioral Finance, Decision Making, Heuristic, Prospects, Big Five Personality Characteristics

References
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[4] Anwar, A. H. (2016). Impact of Behavioral Biases on Investment Decision; Moderating Role of Financial Literacy. SSRN.
[5] 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).
[6] Brian M. Lucey, M. D. (2005). THE ROLE OF FEELINGS IN INVESTOR. JOURNAL OF ECONOMIC SURVEYS, 19 (2).
[7] Daniel Kahneman, E. H. (1998). Aspects of Investor Psychology. Journal of Portfolio Management, 24 (4).
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[9] Dr. V. Shanmugasundaram, D.,. (2011). IMPACT OF LIFE-STYLE CHARACTERISTICS IN INVESTMENT DECISIONS. INTERNATIONAL RESEARCH CONFERENCE AND COLLOQUIUM.
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[16] 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.
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Cite This Article
  • APA Style

    Muhammad Atif Sattar, Muhammad Toseef, Muhammad Fahad Sattar. (2020). Behavioral Finance Biases in Investment Decision Making. International Journal of Accounting, Finance and Risk Management, 5(2), 69-75. https://doi.org/10.11648/j.ijafrm.20200502.11

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    ACS Style

    Muhammad Atif Sattar; Muhammad Toseef; Muhammad Fahad Sattar. Behavioral Finance Biases in Investment Decision Making. Int. J. Account. Finance Risk Manag. 2020, 5(2), 69-75. doi: 10.11648/j.ijafrm.20200502.11

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    AMA Style

    Muhammad Atif Sattar, Muhammad Toseef, Muhammad Fahad Sattar. Behavioral Finance Biases in Investment Decision Making. Int J Account Finance Risk Manag. 2020;5(2):69-75. doi: 10.11648/j.ijafrm.20200502.11

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  • @article{10.11648/j.ijafrm.20200502.11,
      author = {Muhammad Atif Sattar and Muhammad Toseef and Muhammad Fahad Sattar},
      title = {Behavioral Finance Biases in Investment Decision Making},
      journal = {International Journal of Accounting, Finance and Risk Management},
      volume = {5},
      number = {2},
      pages = {69-75},
      doi = {10.11648/j.ijafrm.20200502.11},
      url = {https://doi.org/10.11648/j.ijafrm.20200502.11},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijafrm.20200502.11},
      abstract = {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.},
     year = {2020}
    }
    

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    AU  - Muhammad Atif Sattar
    AU  - Muhammad Toseef
    AU  - Muhammad Fahad Sattar
    Y1  - 2020/04/14
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    DO  - 10.11648/j.ijafrm.20200502.11
    T2  - International Journal of Accounting, Finance and Risk Management
    JF  - International Journal of Accounting, Finance and Risk Management
    JO  - International Journal of Accounting, Finance and Risk Management
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    PB  - Science Publishing Group
    SN  - 2578-9376
    UR  - https://doi.org/10.11648/j.ijafrm.20200502.11
    AB  - 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.
    VL  - 5
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Author Information
  • Department of Management & Economics, University of Science and Technology, Kunming, China

  • Department of Management & Economics, University of Science and Technology, Kunming, China

  • Department of Management & Economics, University of Science and Technology, Kunming, China

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