The Impact Of Heuristic Biases In Investment Decision-Making And Perceived Market Efficiency A Survey At The Tehran Stock Exchange

Subject Areas : Financial and Behavioral Researches in Accounting

Mohammad Sayrani ¹ (Faculty of Industrial Engineering, Management and Accounting, Shahab Danesh University. Qom. Iran)
Moharram razmjoy ² (Faculty of Industrial Engineering Managment and Accounting, Shahab Danesh Univercitiy, Qom. Iran)
Raheleh Samari ³ (Faculty of Industrial Engineering, Management and Accounting, Shahab Danesh University, Qom, Iran)

Received: 2023-05-30 Accepted : 2023-06-25 Published : 2023-06-22

Keywords: Availability, Anchoring, Keywords : Overconfidence, Representativeness, Investment decisions and Market efficiency,

Abstract :

After the global crisis of 2008 and the severe fluctuations of financial markets around the world, the study of investor behavior has received more attention in the field of behavioral finance, and investors' emotions have been one of the key factors determining market movements. Behavioral finance is an evolving field that studies how and what. In this context, it seems important to study the role of emotions such as fear, greed, expectation, as well as the impact of the unconscious mind and beliefs in shaping investment decisions and its impact on market efficiency. This thesis seeks to find an important impact. The most behavioral financial concepts (or cognitive biases) such as overconfidence, stereotypes, familiarity and reliance on individual investors' decisions and market efficiency in Tehran Stock Exchange.The primary data for testing the research model was collected by distributing a structured questionnaire among 400 individual investors active in the Tehran Stock Exchange, and the data of 386 investors was used as the basis for processing. Also, structural equation modeling or partial least squares method was used for data analysis.The findings of this research show that there is a positive and significant relationship between overconfidence biases and representation with the perceived efficiency of the market and investors' decisions, as well as a negative and significant relationship between familiarity with market efficiency and investors' decisions. Yes, but the significance of the relationship between these two variables with reliance bias was not confirmed.

References:

Amirhosseini, Zahra, Bashiri, Alireza, Fallah Ziarani, MohammadHossein. Investigating behavioral factors affecting investment decisions of investment companies listed on the Tehran Stock Exchange.presented In the International Conference on Management in the 21st Century (pp. 1-6).

Bakar, S., & Yi, A. N. C. (2016). The impact of psychological factors on investors’ decision making in Malaysian stock market: a case of Klang Valley and Pahang. Procedia Economics and Finance, 35, 319-328.

Baghdaram, F. (2018). Investigating behavioral financial factors affecting investors' decision in Tehran Stock Exchange. Master's thesis govermental administration, financial orientation (Master’s thesis, Islamic Azad University, central branch).

Barber, B M. Odean, Terrance. (2000). Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. The Journal of Finanace, LV (2)

Bashir, T., Javed, A., Usman, A., Meer, U. I., & Naseem, M. M. (2013). Empirical testing of heuristics interrupting the investor's rational decision making. European Scientific Journal, 9(28).

Bazerman, M. H. & Moor, D. A , (1996).  Judgment In Managerial Decision Making. Translate Sarzaeem, A. Tehran: Kargadan. (2006)

Hadi, F. (2017). Impact of biases on perceived market efficiency: case of pakistani financial market. Research Journal of Finance and Accounting, 1-8.

Jamshidi, N. GHalibaf Asl, H. (2018). Studying the effect of investors personality of their business behavior and investment performance: evidences of Tehran Stoke Exchange. Financial research, 20(1), 75-90. (In persian)

Kengatharan, L., & Kengatharan, N. (2014). The influence of behavioral factors in making investment decisions and performance: Study on investors of Colombo Stock Exchange, Sri Lanka. Asian Journal of Finance & Accounting, 6(1), 1.

Khan, I., Afeef, M., Jan, S., & Ihsan, A. (2021). The impact of heuristic biases on investors’ investment decision in Pakistan stock market: moderating role of longterm orientation. Qualitative Research in Financial Markets.

 Luong, L.P. & Thu Ha, D.T. (2011). Behavioral Factors Influencing Individual Investors’ Decision-Making and Performance. A Survey at the Ho Chi Minh Stock Exchange. Unpublished M. Sc. Thesis, Umea School of Business.

Meshack, k. M. & Nyamute, W., (2016) The Effect of monetary policy on financial performance of commercial banks listed on the Nairobi securities exchange. International Journal of economics and financial, 3, 237-252

Mousavi, S. M. (2015). Investigating the behavior of overconfident investors in listed companies on the Tehran Stock Exchange. (Master's thesis, University of Economic Sciences).

Amari, M. Jarboui, A. (2015). Financial literacy and portfolio diversification: A observation from the Tunisian stock market, 33(6), 808-822.

Nada, S. M. A., &Moa’mer, F. A. (2013). Deanery of Higher Studies Faculty OF Commerce Dep. Of Business Administration

Odean, T. (2002). Volume, volatility, price, and profit when all traders are above average. The journal of finance, 53(6), 1998.

Parveen, S., Satti, Z. W., Subhan, Q. A., Riaz, N., Baber, S. F., & Bashir, T. (2021). Examining investors' sentiments, behavioral biases and investment decisions during COVID-19 in the emerging stock market: a case of Pakistan stock market. Journal of Economic and Administrative Sciences, (ahead-of-print).

Pompian, M. M. (2017). Risk tolerance and behavioral finance. Investments and Wealth monitor, Boston, 20(31), 34-45.

Pompian, M. M. (2012). Behavioral finance and investor types. Managing Behavior to Make Better Investment Decisions. John Wiley & Sons

Pompian, M. M. (2006), Behavioral finance and wealth manayement: how. Translate Badri, A. Tehran: Keihan.

Shah, A. Z. S., Ahmad, M., & Mahmood, F. (2018). Heuristic biases in investment decision-making and perceived market efficiency: A survey at the Pakistan stock exchange. Qualitative Research in Financial Markets.

Shah, S. F., Wajid, R. M., & Rizwan, K. M. (2012). Overconfidence and perceived market efficiency. Interdisciplinary journal of contemporary research in business, 3(10), 984-997.