Behavioral biases of finance professionals: Turkish evidence

Kiymaz, Halil; Öztürkkal, Belma; Akkemik, K. Ali

doi:10.1016/j.jbef.2016.10.001

Cited by 12 publications

(13 citation statements)

References 30 publications

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“…In another study, Kiymaz et al (2016) examined the impact of various personal and objective attributes of 206 finance sector professionals on their risk choices derived from their portfolio allocation and personal wealth data. They found that those with higher expected returns invest more in equities, showing overconfidence.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

The impact of heuristic and herding biases on portfolio construction and performance: the case of Greece

Gavrilakis

Floros

2021

RBF

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PurposeThe purpose of this paper is to identify whether heuristic and herding biases influence portfolio construction and performance in Greece. The current research determines the situation among investors in Greece, a country with several economic problems for the last decade.Design/methodology/approachA survey has been conducted covering a group of active private investors. The relationship between private investors' behavior and portfolio construction and performance was tested using a multiple regression.FindingsThe authors find that heuristic variable affects private investor's portfolio construction and performance satisfaction level positively. A robustness test on a second group, consisting of professional investors, reveals that heuristic and herding biases affect investment behavior when constructing a portfolio.Practical implicationsThe authors recommend investors to select professional's investment portfolio tools in constructing investment portfolios and avoid excessive errors, which occur due to heuristic. The awareness and understanding of heuristic and herding could be helpful for professionals and decision-makers in financial institutions by improving their performance resulting in more efficient markets.Originality/valueThe main contribution of this paper lies in the fact that it is the first study on two major behavioral dimensions that affect the investor's portfolio construction and performance in Greece. The rationale of the current research is that the results are helpful for investors in order to take rational, reliable and profitable decisions.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

The impact of heuristic and herding biases on portfolio construction and performance: the case of Greece

Gavrilakis

Floros

2021

RBF

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“…As suggested previously, Baker et al (2019) indicate that slight evidence exists on how financial literacy relates to behavioural biases. This slight evidence entails recent studies into the disposition effect (Jonsson et al 2017), overconfidence (Kiymaz et al 2016), and tailored interventions aimed at helping individuals circumvent behavioural constraints (Carpena et al 2019). Given this dearth of literature and the notion that financial literacy helps individuals recover, or mitigate, from potentially traumatic experiences, this study aims to add to the literature on financial literacy and behavioural biases within the context of the COVID-19 pandemic.…”

Section: Behavioural Biasesmentioning

confidence: 99%

“…According to Baker et al (2019), only slight evidence is available on how individuals' financial literacy and various demographic characteristics relate to behavioural biases, except for risk-taking behaviour. Of the studies in this area, Jonsson et al (2017) show that financial literacy can mitigate disposition biases, while Kiymaz et al (2016) indicate that overconfidence is related to financial literacy through investor sophistication. Carpena et al (2019) highlight the limitations of financial education.…”

Section: Introductionmentioning

confidence: 99%

The Behavioural Aspects of Financial Literacy

Gerth

López²,

Reddy

et al. 2021

JRFM

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In this paper, we investigate the contribution of behavioural characteristics to the financial literacy of UAE residents after controlling for demographic factors. Specifically, we test the relationship between financial literacy and behavioural biases such as representativeness, self-serving, overconfidence, loss aversion, and hindsight bias. Using data collected through survey questionnaires, we apply the methodology developed by the Organization of Economic Co-operation and Development (OECD) to compute financial literacy scores. Our overall results show that all behavioural biases except for overconfidence bias are positively related to financial literacy. Furthermore, some biases exhibit a stronger quantitative relationship with financial literacy than others. For example, hindsight bias displays the strongest link to financial literacy, followed by self-serving bias. The weakest but still statistically significant effect is loss aversion bias. Although biases, in general, have negative connotations, behavioural biases appear to be related to higher levels of financial literacy.

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“…Traditional financial theories consider that investors operate rationally in making financial decisions (Kiymaz et al, 2016) and evaluate possible alternatives on the basis of utility and associated risk. Risk is understood as the degree of uncertainty or potential financial loss inherent in an investment decision.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

“…The results show that investors tend to make poor decisions about their investments. And Kiymaz et al (2016), studied the behavioral biases of financial professionals in Turkey. These authors concluded that younger professionals, with less training, with less risk aversion, and with unique brokerage accounts are more likely to invest in stocks.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

An Application of the IFM Method for the Risk Assessment of Financial Instruments

et al. 2021

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External influences or behavioral biases can affect the way risk is perceived. This paper studies the prediction of VaR (Value at Risk) as a measure of the risk of loss for investments on financial products. Our aim is to predict the percentage of loss that a financial product would have in the future to assess the risks and determine the potential loss of a security in the stock market, thus reducing reasoning influenced by feelings for bank and financial firms seeking to deploy AI and advanced automation. We used the IFM (inference function for margins) method in different market scenarios, with particular emphasis on the strengths and weaknesses of it. The study is assessed on single product level with the skewed studen-t GARCH(1,1) model and portfolio level with t-copulas for the inter-dependencies. It has been shown that under normal market conditions the risk is predicted properly for both levels. However, when an unexpected market event occurs, the prediction fails. To address this limitation, a combined model with sentiment analysis and regression is proposed for further investigation as a future work.

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Behavioral biases of finance professionals: Turkish evidence

Cited by 12 publications

References 30 publications

The impact of heuristic and herding biases on portfolio construction and performance: the case of Greece

The impact of heuristic and herding biases on portfolio construction and performance: the case of Greece

The Behavioural Aspects of Financial Literacy

An Application of the IFM Method for the Risk Assessment of Financial Instruments

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