Chapter 15 Herd Behavior and Its Effects on the Purchasing Behavior of Investors

Başarır, Çağatay; Yılmaz, Özer

doi:10.1108/s1569-375920190000101015

Cited by 4 publications

(3 citation statements)

References 21 publications

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“…Behavioral finance, however, assumes that investment decisions are often irrational due to imperfect information (Bikhchandani et al , 1992), bounded rationality (Pompain, 2006), anomalies (Ajmal et al , 2011), fundamental heuristics (Baker and Nofsinger, 2010) and psychological biases (Baker and Nofsinger, 2002) or behavioral biases (Shefrin, 2007). Basarir and Yilmaz (2019) argue that investors do not always act rationally in their financial decisions, especially in the financial purchasing decisions of individual investors. Instead, they make irrational decisions by following the majority.…”

Section: Literature Reviewmentioning

confidence: 99%

Does herding behavior matter in investment management and perceived market efficiency? Evidence from an emerging market

Ahmad

2022

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PurposeThis article aims to clarify the mechanism by which herding behavior influences perceived market efficiency, investment decisions and the performance of individual investors actively trading on the Pakistan Stock Exchange (PSX).Design/methodology/approachThe deductive approach was used in this study, as the research is based on the theoretical framework of behavioral finance. A questionnaire and cross-sectional design were employed to collect data from the sample of 309 investors trading on the PSX. The collected data were analyzed using SPSS and AMOS graphics software. Hypotheses were tested using structural equation modeling (SEM).FindingsThe article provides further empirical insights into the relationship between herding behavior and investment management and perceived market efficiency. The results suggest that herding behavior has a markedly negative influence on perceived market efficiency and investment performance, while positively influencing the decision-making of individual investors.Originality/valueThe current study is the first to focus on links between herding behavior and investment management activities and perceived market efficiency. This article enhances the understanding of the role that herding behavior plays in investment management and, more importantly, it improves understanding of behavioral aspects and their influence on investment decision-making in an emerging market. It also adds to the literature in the area of behavioral finance, specifically the role of herding behavior in investment management; this field is in its initial stage, even in developed countries, while little work has been done in developing countries.

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Section: Literature Reviewmentioning

confidence: 99%

Does herding behavior matter in investment management and perceived market efficiency? Evidence from an emerging market

Ahmad

2022

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“…The mechanism for ensuring investment security will be considered as a system of organizational, economic, institutional and legal measures to influence the state's economic environment, which encourages domestic and foreign investors to ensure a level of investment in the economy that would guarantee its expanded reproduction and protection of national economic interests, as well as timely detection, prevention and elimination of threats to the investment security of the state (Bondaruk and Bondaruk, 2019;Basarir and Yilmaz, 2019;Rupeika-Apoga et al, 2018).…”

Section: Literature Reviewmentioning

confidence: 99%

Investment Security Management in Transition Economies: Legal and Organizational Aspects

Vlasenko¹,

Chernysh²,

Dergach³

et al. 2020

IJEBA

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Purpose: There are significant differences between countries in transition from socialism to market economy, and hence differences in investment flows. As a result, the level of economic growth, competitiveness, and integration into the world markets differs significantly. Different transformation strategies, economic policies, and the level of openness of the economy explain the differences between countries. It is revealed that the level of political rights, civil liberties and economic freedom significantly affect investment flows. The aim of this article is to highlight these differences and evaluate them. Design/Methodology/Approach: Data from 18 countries in transition are used to analyze investment security management. Findings: The study has found that countries in transition have a low level of investment flows and a low level of investment security. On average, net investment inflows account for 3.5% of GDP. There is a positive relationship between investment outflows and gross capital formation, gross savings, GDP growth, and the index of economic freedom, however, on the other hand there is negative relationship between capital outflows and the index of political rights and civil liberties. Originality/Value: Investment security management depends on institutions and institutional infrastructure as well as the ability to stimulate investment in the country. Reducing trade barriers and opening up the economy also contributes to increase investment in the country. Over the past ten years, investments in countries in transition have declined considerably due to weak investment security management.

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“…A study found that herding is the most common behavioral bias that happens when they fear of loss or in a period of market distress so they think irrationally. In the markets Proceedings of the 3 rd Asia Pacific International Conference on Industrial Engineering and Operations Management, Johor Bahru, Malaysia, September 13-15, 2022 © IEOM Society International where herd behavior is present, the main element that forms investment decisions is not a compilation of personal information or a personal assessment of investors, but the decision of other investors (Başarir and Yilmaz 2019). The researcher claims the main reason investors do the herding is they think that other investors have more knowledge about financial products, see themselves as inadequate in information evaluations, and act in harmony with the goals of the majority.…”

Section: Herding Behaviormentioning

confidence: 99%

Understanding Factors Affecting Investment Decision-Making During Pandemic

Proceedings of the International Conference on Industrial Engineering and Operations Management

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Investment decision-making is a complex process and play's vital role in achieving investor goals. The current COVID-19 pandemic didn't mitigate investors' enthusiasm for investing in Indonesian stock market. The growth of investors in Indonesia has hits a new record. By the end of 2021, number of single investor identification will have surpassed 7.5 million. This study objectives to investigate factors that affect individual's Indonesian investor in investment decision-making during the pandemic. Four factors such as herding behavior, technology advancement, financial literacy, and firm knowledge were explored. To investigate these variables, questionnaire was designed utilizing the purposive sample method and the Likert scaling methodology. A sample of 338 Indonesian investors who started investing during the COVID 19 pandemic were collected and their data was analyzed using SmartPLS application. The findings of this study demonstrated that herding behavior, technology advancements, financial literacy, and firm knowledge all had a positive and significant impact on Indonesian investors' investment decisions. However, the results show that technological advances are the most important factor influencing investors' investment decisions. The outcomes of this study will boost investor confidence and broaden investor knowledge in weighing decisions for developing better investment activities.

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Chapter 15 Herd Behavior and Its Effects on the Purchasing Behavior of Investors

Cited by 4 publications

References 21 publications

Does herding behavior matter in investment management and perceived market efficiency? Evidence from an emerging market

Does herding behavior matter in investment management and perceived market efficiency? Evidence from an emerging market

Investment Security Management in Transition Economies: Legal and Organizational Aspects

Understanding Factors Affecting Investment Decision-Making During Pandemic

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