The Model of Stock Return Fluctuations and Investors Involved in the Cognitive Biases of Ambiguity Avoidance, Familiarity, Self-documentation, and Procrastination

Subject Areas : Financial and Behavioral Researches in Accounting

mahdi  abbasi asl ¹ (PhD student, Department of Financial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran)
Mohammad Reza  Rostami ² (Assistant Professor, Department of Management, Faculty of Social Sciences and Economics, Al-Zahra University, Tehran, Iran)
mehrzad  minoii ³ (Associate Professor, Department of Financial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran)

Received: 2023-10-23 Accepted : 2023-12-01 Published : 2024-02-02

Keywords: stock returns fluctuations, cognitive biases, Behavioral Biases,

Abstract :

Contrary to the popular belief in modern financial theory that states decision makers behave completely rationally to maximize their profits, studies conducted in the field of behavioral finance show that the human decision-making process is not completely rational and is not based on it. Most of the time, the financial-behavioral factors of the decision-making process examine the perceptions of investors and their reactions to different conditions of the financial market, and emphasize the influence of the personality, culture and judgment of investors based on investment decisions. Recognizing behavioral biases makes investors more aware of their decision-making process, and if faced with biases, they can react well and avoid deviations in decision-making. Therefore, the purpose of this research is to design a model of stock return fluctuations and investors affected by cognitive biases. The statistical population of this research is experts, managers, consultants and experts in financial affairs and the statistical sample includes 160 people.This research is practical in terms of purpose, and in terms of working methods, it is a type of survey research. The study period is in 2022 AD. For sampling, purposeful and snowball sampling methods were used, and with 30 semi-structured interviews with experts, the research reached theoretical saturation. The results obtained from the research showed that cognitive bias, ambiguity avoidance, familiarity, self-documentation, and tardiness have an effect on the volatility of companies' stock returns. The path coefficients (beta) for each bias have been calculated separately, which determines its effect on stock return fluctuations.