Behavioral Finance and Investment Decisions: Influence of Gender, Personality, and Culture (original) (raw)
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Gender Differences in Financial Behaviour Biases and Investment Decisions
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The classic book "Men are from Mars, Women are from Venus" by John Grey shows how multiple eyes view the world. In many respects, women differ from men, including their attitude and approach towards income. A broader understanding had been that the human beings behave rationally when making financial choices, as is emphasized by the various traditional financial hypotheses. Nevertheless, different studies have shown that there are circumstances in which human behavior is affected by moods and impulses that make people behave in an erratic or unreasonable way that influences their decision-making. This remains an unexplored field that individual’s demographic and psychographic features affect behavioral investment decision-making in any way. In this paper authors had tried to answer the role of gender in shaping investment decisions. The research has ramifications for the finance industry as it aims to examine how various investors are affected by behavioral and psychologic...
Psychological aspects of male and female investors towards money matters
Financial sector is the backbone of any healthy nation. In finance theories it is assumed that people behave rationally and predictably when it is economic/financial matter. In several recent studies it is found that male investors are more overconfident than female investors. When it comes to our financial lives, however, our endearing human emotional biases can have a very serious negative effect on our long-term financial health. The study of how emotion affects investing behaviour is called behavioral finance, Present paper is an attempt to understand psychological aspects in attitude of gender investing and analyzes whether concern about investment in men and women are homogeneous or not.
Behavioral Finance Biases in Investment Decision Making
International Journal of Accounting, Finance and Risk Management, 2020
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.
2015
In this study, the authors intend to identify psychological factors which could influence the criteria for investment decision which are discussed with three dimensions (risk, repay and corporate data). With regard to this aim, the criteria for investment decision were examined through defense mechanisms, personality traits, emotional intelligence and financial literacy. Defense mechanisms and certain personality traits have become prominent for risk criterion while defense mechanisms and financial literacyhave been important to repay criterion. Lastly, for corporate data criterion, defense mechanisms, some personality traits and emotional intelligence have been found as important. Within this scope, this study can be said to have carried out a preliminary research in its field in terms of explanatory variables.
The Indian Economic Journal, 2021
This study covers the gender-wise analysis of how behavioural factors and socio-economic factors along with the level of financial literacy influence investment decisions of Indian retail investors. Equally pertinent is to understand that will it have a different influence and bearing on males and females. Multivariate technique partial least squares-structural equation modelling (PLS-SEM) has been applied to develop the model and analyse the results. The study used a structured questionnaire for collecting data from retail investors. The findings of PLS-SEM show that in both genders, behavioural factors, socio-economic factors and financial literacy factors significantly affect investment decisions. However, the findings demonstrate that for women investors, the model is more effective. This study may be useful for prospective fund managers as, in many earlier studies, women are considered to be risk aversive. The results demonstrate that there is a need to target women, and the scenario today is not similar to the pre-existing ones.
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SSRN Electronic Journal, 2013
Investment behaviour is primarily understood in the financial background of profit making. Recent researches in behavioural economics and behavioural finance have shed light on the psychological processes that govern this money-generating activity. The traditional approach to investment involves monetary considerations of profit and loss. However the act of investment is in a sense determined by specific behavioural processes of cognition, motivation and personality and emotional dynamics. Cognitive processes are characterised by cognitive structures and cognitive biases, the nature of which have a significant impact on the investment decisions made. Rational and irrational decisions made are influenced by the unique of constellation of personality traits and motivational processes. Personality constructs of locus of control, risk-taking, etc., have a profound influence on the pattern of investment decisions. Individuals are also differentiated based on their emotional experiences and moods. Pleasant and unpleasant moods have opposite effects on the decisions made. In this paper a primary analysis that attempts to understand the psychological processes that go into decisional processes are made suggesting the inadequacy of present day models of behavioural finance.
Psychological Biases, Main Factors of Financial Behaviour - A Literature Review
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In the context of the sophistication of financial relationships, investment alternatives, risk and recurrent recent financial crises, human factor has become increasingly important in investor decision-making. Studies on investment behavior of a number of authors at different times and places, encouraged this new widely accepted inter-disciplinary field of finance: Behavioral Finance. In order to understand and explain individual decision making and investment behavior, it is necessary to study behavioral factors which impact it. Various scholars have studied factors of financial behavior and their impact on financial decision making, and in particular a special focus has been given to psychological biases. Usually investors are not aware of their behavioral biases. If investors become conscious of biases they can face, they can act more rationally. This way of thinking might increase the quality of their decision-making. The paper aims to help decision-makers and investors get to know with psychological biases, in order to make better decisions when investing, reducing the chances of being vulnerable to behavioral deviations, as the consequences of individual errors are inevitably reflected at a macro level, causing instability and economic-financial crisis.
Irrational Behaviour and Stock Investment Decision. Does Gender Matter?
Revista Gestão Inovação e Tecnologias, 2021
The research aims to examine the influence of irrational behaviour on stock investment decision, specifically, anchoring, disposition effect, home bias, herding, overconfidence and the risk perception. The research further investigates the moderating role of gender between irrational behaviour and stock investment decision. Finally, it reveals which irrational behaviour is most prevalent. A survey collected the primary data from 425 individual investors. The survey evidence shows that, of six irrational behaviours, anchoring, disposition effect, overconfidence and risk perception were influence the investment decision of individual investors, and risk perception comes out to be the significant irrational behaviour on stock investment decision. It further explores that gender has a significant moderation for anchoring, disposition effect, herding, overconfidence, risk perception, and stock investment decision. We recommend that if individuals are aware of the behavioural biases, it w...
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Behavioral finance assumes that investors are irrational and several psychological factors, behavioral biases, and personality traits influence their investment decisions. Therefore, this study intends to examine how behavioral factors, such as personality traits and cultural norms, affect Pakistani investors’ decisions while considering the moderating effect of financial literacy and the mediating role of investor overconfidence. The study used PLS-SEM for statistical analysis on a final useable sample of 396 observations obtained from surveying investors based in Karachi, Lahore, and Islamabad. Our results indicate that overconfidence, extroversion, introversion, individualism and collectivism positively affect investment decisions. Further, we found that overconfidence reduces herding bias while financial literacy moderates the relationship. The empirical results also show that overconfidence mediates the association between (i) financial literacy and herding bias and (ii) fina...
Role of Psychological Factors in Individuals Investment Decisions
International Journal of Economics and Financial Issues, 2015
In this study, the authors intend to identify psychological factors which could influence the criteria for investment decision which are discussed with three dimensions (risk, repay and corporate data). With regard to this aim, the criteria for investment decision were examined through defense mechanisms, personality traits, emotional intelligence and financial literacy. Defense mechanisms and certain personality traits have become prominent for risk criterion while defense mechanisms and financial literacyhave been important to repay criterion. Lastly, for corporate data criterion, defense mechanisms, some personality traits and emotional intelligence have been found as important. Within this scope, this study can be said to have carried out a preliminary research in its field in terms of explanatory variables.