Investigating the impact of financial fallacies on the judgment of financial analysts

Subject Areas : Investments

Farzaneh Ghadimi ¹ , Saeid Aliahmadi ² , Mohammad Alimoradi ³ , Mohammad Reza Shamshiri ⁴

1 - Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.
2 - Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.
3 - Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.
4 - Department of Philosophy, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

Received: 2024-01-13 Accepted : 2024-09-15 Published : 2024-09-15

Keywords: Financial Analysts, Financial Fallacies, Judgment,

Abstract :

 Objective: One of the recent advancements in the science of investment is the emergence of behavioral finance. Behavioral finance, at the micro-level, examines investors' reactions to fallacious reasoning and cognitive biases. Financial fallacies, which stem from erroneous reasoning, can influence the judgment of financial analysts. Therefore, the aim of this study is to investigate the impact of financial fallacies on the judgment of financial analysts.

Research Methodology: This study employs a descriptive-survey approach. Based on hypothesis testing using the one-sample Student's t-test and the G*Power software, a sample of 200 financial analysts was selected. The data collection instrument was a scenario-based questionnaire. Utilizing theoretical foundations, 22 financial fallacies were identified.

Findings: The results of the study indicate that, overall, financial fallacies do not affect the judgment of financial analysts. However, the fallacies of the gambler’s fallacy, hasty generalization, false dichotomy, and hindsight determinism significantly influence their judgment.

Originality/Scientific Value: Based on the findings of this study, which indicate the absence of overarching financial fallacies, capital market participants can place greater trust in the reasoning presented by financial analysts.

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