Behavioural Finance and Investment Decisions: Does Behavioral Bias Matter?

Etse, Nkukpornu; Gyimah, Prince; Sakyiwaa, Linda

dc.contributor.author	Etse, Nkukpornu
dc.contributor.author	Gyimah, Prince
dc.contributor.author	Sakyiwaa, Linda
dc.date.accessioned	2024-10-25T11:01:42Z
dc.date.available	2024-10-25T11:01:42Z
dc.date.issued	2020-10-21
dc.identifier.citation	References Agrawal, K. (2012). A conceptual framework of behavioral biases in finance. IUP Journal of Behavioral Finance, 9(1), 7-18. Ahmad, Z., Ahmad, Z., Ibrahim, H., Ibrahim, H., Tuyon, J., & Tuyon, J. (2017). Institutional investor behavioral biases: syntheses of theory and evidence. Management Research Review, 40(5), 578-603. https://doi.org/10.1108/MRR-04-2016-0091 Babajide, A. A., & Adetiloye, K. A. (2012). Investors‘ behavioural biases and the security market: An empirical study of the Nigerian security market. Accounting and Finance Research, 1(1), 219-229. https://doi.org/10.5430/afr.v1n1p219 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. https://doi.org/10.1016/S2212-5671(16)00040-X Barber, B. M., & Odean, T. (2013). The behavior of individual investors. In Handbook of the Economics of Finance, 2, 1533-1570. https://doi.org/10.1016/B978-0-44-459406-8.00022-6 Barberis, N., & Thaler, R. (2003). A survey of behavioral finance. Handbook of the Economics of Finance, 1, 1053-1128. https://doi.org/10.1016/S1574-0102(03)01027-6 Bashir, T., Rasheed, S., Raftar, S., Fatima, S., & Maqsood, S. (2013). Impact of behavioral biases on investor decision making: Male vs female. Journal of Business and Management, 10(3), 60-68. https://doi.org/10.9790/487X-1036068 http://ibr.ccsenet.org International Business Research Vol. 13, No. 11; 2020 74 Bell, E., & Bryman, A. (2007). The ethics of management research: an exploratory content analysis. British Journal of Management, 18(1), 63-77. https://doi.org/10.1111/j.1467-8551.2006.00487.x Black, F., & Scholes, M. (1973). The pricing of options and corporate liabilities. Journal of Political Economy, 81(3), 637-654. https://doi.org/10.1086/260062 Chin, A. L. L. (2012). Psychological biases and investor behaviour: Survey evidence from Malaysian stock market. International Journal of Social Science, Economics and Arts, 2(2), 67-73. Coutts, A. (2019). Testing models of belief bias: An experiment. Games and Economic Behavior, 113, 549-565. https://doi.org/10.1016/j.geb.2018.11.001 Das, U., & Mohapatra, S. R. (2017). Behavioural Biases in Investment Decision Making: A research study on snakebite and house money effects on Indian Individuals. Asian Journal of Management, 8(3), 460-470. https://doi.org/10.5958/2321-5763.2017.00074.9 Eichholtz, P., & Yönder, E. (2011). CEO Overconfidence, Corporate Investment Activity, and Performance: Evidence from REITs. In The 2011 Annual Meeting of the Academy of Behavioral Finance and Economics, 128. Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The journal of Finance, 25(2), 383-417. https://doi.org/10.2307/2325486 Fama, E. F. (1998). Market efficiency, long-term returns, and behavioral finance. Journal of financial economics, 49(3), 283-306. https://doi.org/10.1016/S0304-405X(98)00026-9 Feng, L., & Seasholes, M. S. (2005). Do investor sophistication and trading experience eliminate behavioral biases in financial markets? Review of Finance, 9(3), 305-351. https://doi.org/10.1007/s10679-005-2262-0 Ghelichi, M. A., Nakhjavan, B., & Gharehdaghi, M. (2016). Impact of Psychological Factors On Investment Decision Making In Stock Exchange Market. Asian Journal of Management Sciences and Education 5(3), 36-44. Gyimah, P., & Boachie, W. K. (2018). Effect of microfinance products on small business growth: emerging economy perspective. Journal of Entrepreneurship and Business Innovation, 5(1), 59-71. https://doi.org/10.5296/jebi.v5i1.12378 Gyimah, P., Appiah, K. O., & Lussier, R. N. (2020). Success versus failure prediction model for small businesses in Ghana. Journal of African Business, 21(2), 215-234. https://doi.org/10.1080/15228916.2019.1625017 Gyimah, P., Marom, S., & Lussier, R. N. (2019). Small Business Success or Failure Prediction: A Comparative Study in Ghana and Israel. Journal of Applied Business and Economics, 21(3), 37-52. https://doi.org/10.33423/jabe.v21i3.2079 Jaiyeoba, H. B., & Haron, R. (2016). A qualitative inquiry into the investment decision behaviour of the Malaysian stock market investors. Qualitative Research in Financial Markets, 8(3), 246-267. https://doi.org/10.1108/QRFM-07-2015-0027 Kafayat, A. (2014). Interrelationship of biases: effect investment decisions ultimately. Theoretical and Applied Economics, 21(6), 85-110. Kahneman, D. (1979). Prospect theory: An analysis of decisions under risk. Econometrica, 47, 313-327. https://doi.org/10.2307/1914185 Kahneman, D., & Tversky, A. (1982). The psychology of preferences. Scientific American, 246(1), 160-173. https://doi.org/10.1038/scientificamerican0182-160 Kahneman, D., & Tversky, A. (2013). Prospect theory: An analysis of decision under risk. In handbook of the fundamentals of financial decision making: Part I, 99-127. https://doi.org/10.1142/9789814417358_0006 Kartasova, J., Gaspareniene, L., & Remeikiene, R. (2014). Influence of ―Snake-Bite‖ Effect on Investment Return Rate: Lithuanian Example. Mediterranean Journal of Social Sciences, 5(27), 1769-1769. https://doi.org/10.5901/mjss.2014.v5n27p1769 Keller, J., & Pastusiak, R. (2016). The Psychology of Investing: Stock market recommendations and their impact on investors‘ decisions (the example of the Polish stock market). Acta Oeconomica, 66(3), 419-437. https://doi.org/10.1556/032.2016.66.3.3 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 and http://ibr.ccsenet.org International Business Research Vol. 13, No. 11; 2020 75 Accounting, 6(1), 1-23. https://doi.org/10.5296/ajfa.v6i1.4893 Kent, R. (2007). Marketing research: approaches, methods and applications in Europe. London: Thomson Learning. Lim, L. C. (2012). The relationship between psychological biases and the decision making of investor in Malaysian share market. In Unpublished Paper International Conference on Management, Economics and Finance 2012 Proceeding. Lintner, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. The Review of Economics and Statistics, 13-37. https://doi.org/10.2307/1924119 Luong, L. P., & Ha, T. T. D. (2011). Behavioral factors influencing individual investor‘s decision making and performance: a survey of the Ho Chi Minh Stock Exchange. Umea School of Business Spring semester. Retrieved from https://www.diva-portal.org/smash/record.jsf?pid=diva2%3A423263&dswid=453 Mbaluka, P., Muthama, C., & Kalunda, E. (2012). Prospect Theory: Test on Framing and Loss Aversion Effects on Investors Decision-Making Process At the Nairobi Securities Exchange, Kenya. Retrieved from http://41.89.227.156:8080/xmlui/handle/123456789/127 Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American economic review, 48(3), 261-297. Mossin, J. (1966). Equilibrium in a capital asset market. Econometrica: Journal of the Econometric Society, 768-783. https://doi.org/10.2307/1910098 Muradoglu, G., & Harvey, N. (2012). Behavioural finance: the role of psychological factors in financial decisions. Review of Behavioural Finance, 4(2), 68-80. https://doi.org/10.1108/19405971211284862 Ngoc, L. T. B. (2014). Behavior pattern of individual investors in stock market. International Journal of Business and Management, 9(1), 1-16. https://doi.org/10.5539/ijbm.v9n1p1 Nofsinger, J., & Varma, A. (2014). Socially responsible funds and market crises. Journal of Banking and Finance, 48, 180-193. https://doi.org/10.1016/j.jbankfin.2013.12.016 Nunally, J., & Bernstein, L. (1994). Psychometric Theory. New York: MacGrow-Hill Higher. Nunnally, J. C., & Bernstein, I. H. (1994). Validity. Psychometric Theory, 99-132. Odean, T. (1999). Do investors trade too much? American economic review, 89(5), 1279-1298. https://doi.org/10.1257/aer.89.5.1279 Olsen, R. A. (1998). Behavioral finance and its implications for stock-price volatility. Financial Analysts Journal, 54(2), 10-18. https://doi.org/10.2469/faj.v54.n2.2161 Prosad, J. M., Kapoor, S., & Sengupta, J. (2015). Behavioral biases of Indian investors: a survey of Delhi-NCR region. Qualitative Research in Financial Markets, 7(3), 230-263. https://doi.org/10.1108/QRFM-04-2014-0012 Qadri, S. U., & Shabbir, M. (2014). An Empirical Study of Overconfidence and Illusion of Control Biases, Impact on Investor‘s Decision Making: An Evidence from ISE. European Journal of Business and Management, 6(14), 38-44. Qureshi, S. A., & Hunjra, A. I. (2012). Factors affecting investment decision making of equity fund managers. Wulfenia Journal, 19(10), 280-291. Raharja, B., Suhaeli, D., & Mranani, M. (2017). Research of the stock price overreaction and investor overconfidence issues. Business, Management and Education, 15(1), 127-139. https://doi.org/10.3846/bme.2017.358 Raheja, S., & Dhiman, B. (2017). Influence of personality traits and behavioral biases on investment decision of investors. Asian Journal of Management, 8(3), 819-826. https://doi.org/10.5958/2321-5763.2017.00129.9 Ramiah, V., Zhao, Y., Moosa, I., & Graham, M. (2016). A behavioural finance approach to working capital management. The European Journal of Finance, 22(8-9), 662-687. https://doi.org/10.1080/1351847X.2014.883549 Sakyiwaa, L., Gyimah, P., & Nkukpornu, E. (2020). Preferred investment vehicles of salaried workers of universities in Sub-Saharan Africa. EuroMed Journal of Management, forthcoming. Sarpong-Danquah, B., Gyimah, P., Poku, K., & Osei-Poku, B. (2018). Financial literacy assessment on tertiary http://ibr.ccsenet.org International Business Research Vol. 13, No. 11; 2020 76 students in Sub-Saharan Africa: A Ghanaian perspective. International Journal of Accounting and Financial Reporting, 8(2), 76-91. https://doi.org/10.5296/ijafr.v8i2.12928 Shah, S. Z. A., & Ahmad, M. (2019). Entrepreneurial orientation and performance of small and medium-sized enterprises. Competitiveness Review: An International Business Journal, 29(5), 551-572. https://doi.org/10.1108/CR-06-2018-0038 Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The Journal of Finance, 19(3), 425-442. https://doi.org/10.1111/j.1540-6261.1964.tb02865.x Shefrin, H. (2002). Beyond greed and fear: Understanding behavioral finance and the psychology of investing. Oxford University Press on Demand. https://doi.org/10.1093/0195161211.001.0001 Shefrin, H. (2010). Behavioralizing finance. Foundations and Trends in Finance, 4(1-2), 1-184. https://doi.org/10.1561/0500000030 Subash, R. (2012). Role of behavioral finance in portfolio investment decisions: Evidence from India. Retrieved from https://dodo.is.cuni.cz/handle/20.500.11956/43150?locale-attribute=en Subrahmanyam, A. (2008). Behavioural finance: A review and synthesis. European Financial Management, 14(1), 12-29. Tripathy, C. K. (2014). Role of Psychological Biases in the Cognitive Decision Making Process of Individual Investors. Orissa Journal of Commerce, 34(1), 69-80. Tversky, A., & Kahneman, D. (1991). Loss aversion in riskless choice: A reference-dependent model. The Quarterly Journal of Economics, 106(4), 1039-1061. https://doi.org/10.2307/2937956 Wamae, J. N. (2013). Behavioural factors influencing investment decision in stock market: A survey of investment banks in Kenya. International Journal of Social Sciences and Entrepreneurship, 1(6), 68-83. Waweru, N. M., Munyoki, E., & Uliana, E. (2008). The effects of behavioural factors in investment decision-making: A survey of institutional investors operating at the Nairobi Stock Exchange. International Journal of Business and Emerging Markets, 1(1), 24-41. https://doi.org/10.1504/IJBEM.2008.019243 Notes Note 1. We did not show the Table for the Chronbach‘s Alpha results for each of the variables used for the study, and is available upon request.	en_US
dc.identifier.issn	1913-9004
dc.identifier.uri	http://localhost:8080/xmlui/handle/123456789/30609
dc.description	STAFF/FACULTY PUBLICATION	en_US
dc.description.abstract	Abstract This paper examines the nexus between behavioural bias and investment decisions in a developing country context. Specifically, this study tests the effect of four behavioural biases (overconfidence, regret, belief, and ―snakebite‖) on investment decisions. Descriptive statistics and inferential statistics including multiple regression are used to examine the behavioural biases-investment decisions nexus. The study reveals that the four bias have a significant positive and robust relationship with investment decision making. The result also shows that the "snakebite" effect contributes more to the decision making, followed by belief bias then regret bias. Overconfidence bias, however, contributes the least effect on investment decisions. Our contribution confirms the prospect theory and that behavioural bias influences investment decisions in the developing country perspective. Keywords: behavioral Finance, behavioural bias, investment decisions, finance, developing countries	en_US
dc.description.sponsorship	CHRISTIIAN SERVICE UNIVERSITY	en_US
dc.language.iso	en	en_US
dc.publisher	CHRISTIAN SERVICE UNIVERSITY	en_US
dc.relation.ispartofseries	Vol. 13;No. 11
dc.subject	behavioral Finance, behavioural bias, investment decisions, finance, developing countries	en_US
dc.title	Behavioural Finance and Investment Decisions: Does Behavioral Bias Matter?	en_US
dc.title.alternative	International Business Research	en_US
dc.type	Article	en_US