Herding Effects, Over Confidence, Availability Bias and Representativeness as Behavioral Determinants of Perceived Investment Performance: An Empirical Evidence from Pakistan Stock Exchange (PSX)

Javed, Hassan; Bagh, Tanveer; Razzaq, Sadaf

doi:10.4172/2375-389.1000275

Cited by 55 publications

(64 citation statements)

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“…Our findings are supported by prior literature [16,19,28]. Table 7 reports the dummies oftheIHR index among 667 and 379 traded firms of SSE and SZSE, respectively, and favors the hypothesis 2 [28,38,56]. The proportion of holding IHR, dummy 1, among traded firms varies with respect to time and more variation in IHR seems at SZSE, i.e., minimum 7% to maximum 13% during the sample periods.…”

Section: Herding At Equity Marketssupporting

confidence: 88%

Does Herding Bias Drive the Firm Value? Evidence from the Chinese Equity Market

et al. 2019

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Equity markets play a pivotal role in the sustainability of developing countries, such as China. The literature on the detection of herding biases is confined to the aggregate level (firms, sector/industry and market). The present study adds to the behavioral finance literature by addressing the surprisingly unnoticed phenomena of the behavioral impact of herding bias on firm value (FV) at the firm level, using the sample of A-Shares listed firms at the Shanghai and Shenzhen Stock Exchanges (SSE and SZSE) under panel fixed effect specification. Initially, we detect the existence of investors and managers herding (IHR and MHR) biases at firm-level, and later, we examine their impact (distinct and interactive) upon the FV. The empirical results document the presence of IHR and MHR bias at market, sector and firm-level in both equity markets, which potentially drive the FV, while the impact is more pronounced during the extreme trading period. The findings are robust under different time intervals, and industry classification, therefore, offers useful policy implications to understand the behavioral dynamics of investors and managers.

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Section: Herding At Equity Marketssupporting

confidence: 88%

Does Herding Bias Drive the Firm Value? Evidence from the Chinese Equity Market

et al. 2019

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“…Availability bias has a significant effect on investment decisions (Chandra & Kumar, 2012). This condition occurs when investors rely on information rather than analyze or perform other procedures (Javed, Bagh, & Razzaq, 2017), and predict the stock price period with based on current prices (Bakar & Yi, 2016). Availability bias will have a significant positive effect on investment decisions due to the inexperience factor so that they tend to trust the available data (Raut & Kumar, 2018).…”

Section: Availability Biasmentioning

confidence: 99%

“…Overconfidence bias has a significant positive effect on investment decisions, is characterized by excessive self-confidence (Chandra & Kumar, 2012; Ghelichi, Nakhjavan, & Gharehdaghi, 2016), and ignores any information from other rational investors, because they rely on their knowledge and experience in transactions (Alquraan, Alqisie, & Al Shorafa, 2016), but sometimes also because of their beliefs with no reason (Grover & Singh, 2015), and it is the same for all sexes (Bashir, 2013). According to Javed et al (2017), the relationship positive between variables overconfidence and investment decision because of the behavior of overconfidence that shown by investors, the performance of investments also increased. This condition is the opposite, according to Parveen & Siddiquee (2018) as indicated otherwise, the relationship overconfidence bias with the investment decision is negative, which means that the investor with overconfidence will increasingly bring losses and ses this is a psychological phenomenon, not rationality (Boda & Sunitha, 2018), and investors feel very confident in their decisions and think they are doing something right (Bakar & Yi, 2016).…”

Section: Overconfidence Biasmentioning

confidence: 99%

The Effect of Emotional Contagion, Availability Bias, Overconfidence, Loss Aversion, and Herding on Investment Decisions in the Millennial Generation During the Beginning of the Covid-19 Pandemic

Yuwono¹,

Elmadiani²

2021

Proceedings of the 1st International Conference on Law, Social Science, Economics, and Education, ICLSSEE 2021, March 6th 2021

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The purpose of this study was to analyze the effect of emotional contagion, availability bias, overconfidence, loss aversion, and herding on investment decisions in the millennial generation who live in Batam City, which is an area in Indonesia that has free trade zone and special economic zone facilities. This research is quantitative research with distributing questionnaires, the sample was taken from 220 active millennial investors who invest in stocks. By processing data using software of SmartPLS version 3.2, the results show that availability bias, loss aversion, and herding have a significant positive effect on investment decisions, but emotional contagion and overconfidence bias have no significant effect on investment decisions. The results of this study indicate that millennial investors during the Covid-19 pandemic were still able to think positively and carefully in making the right investment decisions.

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“…The lack of understanding of economics and finance is a strong deterrent to shareholdings and the lack of literacy has discouraged households from Business and Economic Research ISSN 2162-4860 2020 taking part in the stock market. (Javed, Bagh, & Razzak, 2017)Have studies herding effect, overconfidence & representativeness in their study to know determinants of behaviour & perceived investment performance in PSX known as Pakistan stock exchange. The study shows that overconfidence, representative, and herding bias have a positive impact on perceived investment performance& strong correlation was found between the variables.…”

Section: Literature Reviewmentioning

confidence: 99%

Explaining the Disposition Bias among Investors: The Mediatory Role of Personality, Financial Literacy, Behavioral Bias and Risk Tolerance

Basheer

Siddiqui

2020

SSRN Journal

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Investors are frequently subjected to cognitive error. They often sell stocks that have increased in value, while keeping stocks that have dropped in value. We proposed a theoretical framework explaining what factors affect this disposition bias and how. According to the proposed theory, Disposition bias is affected through risk tolerance, financial literacy, and behavioural biases. Lower risk tolerance and low financial literacy can aggravate disposition bias. We also proposed that personality factors such as Superego, Parsimony, Orderliness, and Obstinacy also influences both the level of financial literacy as well as behavioural biases that in turn affect disposition bias. Empirical validity was established by conducted a survey using close ended questionnaire. Data was collected from 182 investors trading through 3 brokerage firms in Karachi. Confirmatory factor analysis and structured equation modelling were used for analysis. The results suggested that financial literacy significantly affect all behavioural biases (except Representativeness) as well as Disposition Bias. Higher financial literacy will tend to show less disposition bias and they better can make portfolio decision. Similarly, risk tolerance also affects disposition biases as a risk-averse investor will tend to show more disposition bias. Among the behavioural factors, Anchoring, overconfidence, and loss aversion affect disposition biases. Overconfidence also seems to affect risk tolerance. Personality traits like superego and parsimony seem to affect

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Herding Effects, Over Confidence, Availability Bias and Representativeness as Behavioral Determinants of Perceived Investment Performance: An Empirical Evidence from Pakistan Stock Exchange (PSX)

Cited by 55 publications

References 0 publications

Does Herding Bias Drive the Firm Value? Evidence from the Chinese Equity Market

Does Herding Bias Drive the Firm Value? Evidence from the Chinese Equity Market

The Effect of Emotional Contagion, Availability Bias, Overconfidence, Loss Aversion, and Herding on Investment Decisions in the Millennial Generation During the Beginning of the Covid-19 Pandemic

Explaining the Disposition Bias among Investors: The Mediatory Role of Personality, Financial Literacy, Behavioral Bias and Risk Tolerance

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