Analysis of Behavioral and Psychological Factors on Stock Market Anomalies and Investor Decisions

Subject Areas : Financial Economics

Mehrdad Neamati ^{1 *} , Saman Rahmani Noroozabad ²

1 - 1. Assistant Prof., Department of Management, Ilam University
2 - دانشگاه آزاد اسلامی2. Ph.D. in Financial Management, Finance Department, Science and Research Branch

Received: 2025-01-01 Accepted : 2025-01-20 Published : 2025-07-02

Keywords: Investor decisions, behavioral and psychological factors, stock market anomalies.,

Abstract :

Behavioral finance helps in studying psychological variables that can influence financial decision-making. Therefore, before making any investment decision to maximize wealth, it is better to understand the characteristics of securities markets using a combination of psychology and finance. The present study aims to identify the impact of behavioral and psychological factors on stock market anomalies and investor decisions in the Tehran Stock Exchange. In this field study, a standard questionnaire was used to collect data. The statistical population of this research consists of individual investors in the Tehran Stock Exchange, and from this population, 302 investors were randomly selected and examined using Cochran’s formula. To examine the relationships between the research variables, the structural equation modeling technique and LISREL software were used. The results of good fit indices such as RMSEA, GFI, and AGFI indicate a good fit of the model and the usability of the results. The findings suggest that the impact of overconfidence, herd bias, disposition effect, financial literacy, and risk tolerance on fundamental and technical anomalies is positive and significant. Additionally, fundamental and technical anomalies have a positive and significant impact on investor decisions. Based on data analysis, it was found that behavioral biases and market anomalies are closely related. The findings confirmed the mediating role of market anomalies in relation to investor decision-making. The results showed that investors act irrationally in their decisions, which is likely to cause anomalies in the market.

 

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