Heuristic biases and investment decisions: multiple mediation mechanisms of risk tolerance and financial literacy—a survey at the Tanzania stock market

Kasoga, Pendo Shukrani

doi:10.1108/jmb-10-2021-0037

Cited by 37 publications

(45 citation statements)

References 36 publications

(61 reference statements)

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“…As a direct result of this, investors may experience cognitive dissonance, leading them to place a greater emphasis on events that occurred more recently while reducing the importance they place on the prospect of long-term profit ( Kubilay and Bayrakdaroglu, 2016 ). When market players are overconfident, they engage in bigger quantities of trade and take more risks, both of which lead to an increase in market volatility and mispricing as well as a loss in market efficiency ( Kasoga, 2021 ). When market participants are overconfident, the market is less efficient.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

RETRACTED: An empirical assessment of financial literacy and behavioral biases on investment decision: Fresh evidence from small investor perception

et al. 2022

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To have enough financial literacy, an investor must be able to make intelligent investment choices, and on the other hand, the heuristic bias, the framing effect, cognitive illusions, and herd mentality are all variables that contribute to the formation of behavioral biases, also known as illogical conduct, in the decision-making process. The current research looks specifically at behavioral biases and financial literacy influence investment choices, particularly on stock market investment. For the research, a representative sample of 450 individual investors was evaluated. A structured questionnaire was designed using the Likert’s scale method to elicit the research variables, and the data acquired were analyzed using the SEM method. According to the findings, there was a statistically significant link between heuristic bias and the development of behavioral bias in decision-making. Nevertheless, cognitive illusions, the herd mentality, and the framing effect all have a deleterious impact on behavioral biases. In addition, investors often adhere to heuristic biases rather than other irrational strategies when making investment judgments. Therefore, individual investors’ financial literacy level greatly influences the choices made about investments in the stock market.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

RETRACTED: An empirical assessment of financial literacy and behavioral biases on investment decision: Fresh evidence from small investor perception

et al. 2022

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Section: Data Collection Methods and Toolmentioning

confidence: 99%

“…A questionnaire survey tool enables the collection of vast amounts of information and requires less time than interviews. Furthermore, as opined by Kasoga (2021) when respondents have limited time for interviews, a questionnaire can be very useful. Therefore, the study collected enough data to make inferences about the study variables through a structured questionnaire.…”

Section: Methodsmentioning

confidence: 99%

Obtaining the best value for money through procurement planning: can procurement regulatory compliance intervene?

Changalima

Ismail

Mwaiseje

2022

JMB

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PurposeWhile empirical studies establish the importance of procurement planning in achieving value for money (VfM) in procurement, there is scant evidence demonstrating a link between procurement planning and procurement regulatory compliance, and thus VfM. As a result, this study examined how procurement regulatory compliance can be applied when procurement practitioners in Tanzania seek to maximize VfM through procurement planning.Design/methodology/approachA cross-sectional research design was adopted from which data were collected once through a structured questionnaire. The structural equation modeling (SEM) and Hayes' PROCESS macro test for mediation analysis were used to analyze the collected data.FindingsProcurement planning has a significant and positive relationship with procurement regulatory compliance (ß = 0.491, p < 0.001). Procurement regulatory compliance has a significant and positive relationship with VfM in procurement (ß = 0.586, p < 0.001). Results also show that procurement planning is a significant positive predictor of VfM (ß = 0.257, p = 0.005). Furthermore, the bootstrapping confidence intervals revealed that procurement regulatory compliance significantly mediates the relationship between procurement planning and VfM in procurement.Research limitations/implicationsAlthough the study was able to accomplish its overall objective, it is limited in terms of the geographical setting under which the study was conducted. Hence, the generalization of research results should be made with caution as each country has specific public procurement laws and regulations governing the conduct of procurement activities in the public sector.Originality/valueThe study contributes to the growing debate on achieving VfM in procurement activities. The study adds to the literature on public procurement by establishing the mediation effect of procurement regulatory compliance on the quest toward achieving VfM in public procurement.

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“…People make bad financial decisions (Str€ omb€ ack et al, 2017), save too little (Lusardi, 1999), overspend (Sotiropoulos and d'Astous, 2013) and sometimes invest in things they regret (Abendroth and Diehl, 2006). In Tanzania, most people are irrational and do not make good investment decisions because of low financial literacy (Kasoga, 2021). There is evidence indicating that lack of self-control is responsible for many social problems, such as impulsecontrol problems, procrastination and overspending (Ozer and Mutlu, 2019).…”

Section: Introductionmentioning

confidence: 99%

“…Most of the previous studies have focused on the influence of the big five personality traits on investment decisions (Jiang et al, 2020;Priyadharshini, 2020;Raheja, 2017). Other studies have focused on cognitive factors such as financial literacy and investment decisions (Kasoga, 2021;Lusardi and Mitchelli, 2007). Few studies have focused on the influence of non-cognitive factors related to self-control and other similar constructs such as deliberative thinking and optimism on financial behavior, investment decisions and financial well-being (e.g.…”

Section: Introductionmentioning

confidence: 99%

Psychological traits and investment decisions: the mediation mechanism of financial management behavior – evidence from the Tanzanian stock market

Kasoga

Tegambwage

2022

JMB

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PurposeThe purpose of the paper is to examine the financial management behavior (FMB) mediation mechanism in self-control, optimism, deliberative thinking and investment decisions in the Tanzanian stock market.Design/methodology/approachA sample of 268 individual investors in the Tanzanian stock market was obtained through questionnaires. The data were analyzed using structural equation modeling.FindingsThe findings show that self-control, optimism and deliberative thinking are significantly and positively related to FMB and investment decisions. The findings also confirmed the mediating role of FMB in the influence of self-control, optimism and deliberative thinking on investment decisions among Tanzanian individual investors. These findings imply that people with good self-control, optimistic and deliberative thinking are more likely to save money, have better FMB and prefer to make investment decisions.Research limitations/implicationsThe study deals with individual investors. Future research could examine the effects of psychological traits on investment decisions by adding or modifying the items of particular constructs and studying institutional investors.Practical implicationsIndividual investors can use the information to study and evaluate their financial behavior and stock investment decisions. This research can be used by security firms to better understand investor behavior, forecast future market trends and advice investors. Individual investors require psychological features to manage their behavior in various aspects, ranging from affective behavior to cognition, which are relevant for investing decisions.Originality/valueFew studies have examined the influence of self-control, optimism and deliberative thinking on the investment decisions of individual investors. The unique empirical analysis developed in this paper is that it examines the mediation mechanisms of FMB with respect to self-control, optimism and deliberative thinking and investment decisions among individual investors in the Tanzanian stock market.

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Heuristic biases and investment decisions: multiple mediation mechanisms of risk tolerance and financial literacy—a survey at the Tanzania stock market

Cited by 37 publications

References 36 publications

RETRACTED: An empirical assessment of financial literacy and behavioral biases on investment decision: Fresh evidence from small investor perception

RETRACTED: An empirical assessment of financial literacy and behavioral biases on investment decision: Fresh evidence from small investor perception

Obtaining the best value for money through procurement planning: can procurement regulatory compliance intervene?

Psychological traits and investment decisions: the mediation mechanism of financial management behavior – evidence from the Tanzanian stock market

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