Heuristics Bias and Investment Performance: Does Age Matter? Evidence from Colombo Stock Exchange

Siraji, M.

doi:10.9734/ajeba/2019/v12i430156

Cited by 11 publications

(8 citation statements)

References 24 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Dangol and Manandhar (2020) investigated the influence of availability bias, representative bias, anchoring and adjustment bias, and overconfidence bias. Siraji (2019), Bakar and Yi (2016), and find that all four heuristic biases have a substantial link with irrationality in investing decisions. Based on the findings of these studies, we claim that heuristics impact Nepalese investors' investment behavior; even though a majority of Nepalese investors are educated, they choose stocks based on mental shortcuts rather than rational judgments.…”

Section: Theoretical Reviewmentioning

confidence: 84%

“…Women are less overconfident in their investing decisions than males in terms of investment decisions (Kumar & Goyal, 2016). According to Siraji (2019), the heuristics, anchoring, availability bias, and representational bias positively impact stock investment success. On the other hand, overconfidence has a significant detrimental influence on the success of stock investments at the Colombo Stock Exchange.…”

Section: Theoretical Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Effect of Cognitive Biases on Investment Decision Making: A Case of Pokhara Valley, Nepal

Dhungana

Bhandari²,

Ojha

et al. 2022

QJMSS

View full text Add to dashboard Cite

Background: Behavioral finance deals with the study of psychological influences on investors and financial markets. Investors commonly perform investment analysis through fundamental and technical analysis. The behavior of the investment market originates from the principles of psychological decision-making that explains the reasons behind buying and selling stocks. Objectives: This paper aims to examine the effect of cognitive biases on investment decisions in Pokhara Valley, Nepal. The effect of five cognitive biases, such as availability, anchoring, overconfidence, herd instinct, and regret aversion, is measured on rational investment decision-making. Methods: This study is based on primary data sources using non-probability (convenience method) sampling techniques. There are seven brokerage houses in Pokhara valley, and researchers selected 179 respondents involved in stock market investment. Both descriptive and inferential analyses were made to analyze the data. Results: The study discovers a link between irrationality in financial decision-making and availability, overconfidence, and herd instinct biases, but anchoring and regret aversion biases had no effect on irrational investment decisions. However, though all the biases have a positive relationship with an irrational investment decision, overconfidence bias has the highest impact. Regret aversion bias has the least impact on investment decisions in comparison to the other four biases. Conclusion: The investors and the policymakers should focus on finding the cognitive biases and various de-biasing methods to eradicate those biases throughout investment decision-making. The findings of this study have a number of implications for investors, brokers, and governments who aim to stimulate stock market investment.

show abstract

Section: Theoretical Reviewmentioning

confidence: 84%

Section: Theoretical Reviewmentioning

confidence: 99%

Effect of Cognitive Biases on Investment Decision Making: A Case of Pokhara Valley, Nepal

Dhungana

Bhandari²,

Ojha

et al. 2022

QJMSS

View full text Add to dashboard Cite

show abstract

“…Additionally, availability bias suggests that easily recalled events are perceived to happen with a greater likelihood ( Rasheed et al, 2018 ). Institutional investor decisions are also affected by the availability bias ( Siraji, 2019 ). Javed et al (2017) concluded in their research that availability bias significantly and positively influences expected investment performance.…”

Section: Introductionmentioning

confidence: 99%

Post-COVID-19 investor psychology and individual investment decision: A moderating role of information availability

Jan

Jain²,

Li³

et al. 2022

Front. Psychol.

View full text Add to dashboard Cite

This study aims to investigate the influence of psychological biases on the investment decision of Chinese individual investors after the pandemic of COVID-19 with a moderating role of information availability. A cross-sectional method with a quantitative research approach was employed to investigate the hypothesized relationships among variables. The snowball sampling technique was applied to collect the data through a survey questionnaire from individual investors investing in the Chinese stock market. Smart-PLS statistical software was used to analyze the data and for the estimation of hypotheses. Results indicated that overconfidence, representative bias, and anchoring bias have a significant and positive influence on investment decisions during the post-Covid-19 pandemic; however, the availability bias has insignificant and negative effects on the investment decision during the post-COVID-19 pandemic. Moreover, findings indicated that information availability has a significant moderating role in the relationship of psychological biases with the investment decision during the post-COVID-19 pandemic. This study contributes to the body of knowledge regarding behavior finance, psychological biases, and investment decision in emerging stock markets. The findings of the present study improve the understanding that how investors’ psychology affects their investment decisions.

show abstract

“…disposition effect, loss aversion and confirmation, also positively affect investment performance, but the p -value did not reach a high significance value. Siraji (2019) examined the role of heuristic-driven biases in the investment performance of investors trading at the Colombo Stock Exchange and demonstrated that representativeness, availability, overconfidence and anchoring have a significant relationship with investment performance, whereas the gambler’s fallacy has a negligible association with investment performance.…”

Section: Literature Reviewmentioning

confidence: 99%

Heuristic-driven biases as mental shortcuts in investment management activities: a qualitative study

Ahmad

2023

QRFM

View full text Add to dashboard Cite

Purpose This study aims to use a qualitative approach to explore and clarify the mechanism by which heuristic-driven biases influence the decisions and performance of individual investors actively trading on the Pakistan Stock Exchange (PSX). It also aims to identify how to overcome the negative effect of heuristic-driven biases, so that finance practitioners can avoid the expensive errors which they cause. Design/methodology/approach This study adopts an interpretative approach. Qualitative data was collected in semistructured interviews, in which the target population was asked open-ended questions. The sample consists of five brokers and/or investment strategists/advisors who maintain investors’ accounts or provide investment advice to investors on the PSX, who were selected on a convenient basis. The researchers analyzed the interview data thematically. Findings The results confirm that investors often use heuristics, causing several heuristic-driven biases when trading on the stock market, specifically, reliance on recognition-based heuristics, namely, alphabetical ordering of firm names, name memorability and name fluency, as well as cognitive heuristics, such as herding behavior, disposition effect, anchoring and adjustment, repetitiveness, overconfidence and availability biases. These lead investors to make suboptimal decisions relating to their investment management activities. Due to these heuristic-driven biases, investors trade excessively in the stock market, and their investment performance is adversely affected. Originality/value This study provides a practical framework to explore and clarify the mechanism by which heuristic-driven biases influence investment management activities. To the best of authors’ knowledge, the current study is the first to focus on links between heuristic-driven biases, investment decisions and performance using a qualitative approach. Furthermore, with the help of a qualitative approach, the investigators also highlight some factors causing an increased use of heuristic variables by investors and discuss practical approaches to overcoming the negative effects of heuristics factors, so that finance practitioners can avoid repeating the expensive errors which they cause, which also differentiates this study from others.

show abstract

Heuristics Bias and Investment Performance: Does Age Matter? Evidence from Colombo Stock Exchange

Cited by 11 publications

References 24 publications

Effect of Cognitive Biases on Investment Decision Making: A Case of Pokhara Valley, Nepal

Effect of Cognitive Biases on Investment Decision Making: A Case of Pokhara Valley, Nepal

Post-COVID-19 investor psychology and individual investment decision: A moderating role of information availability

Heuristic-driven biases as mental shortcuts in investment management activities: a qualitative study

Contact Info

Product

Resources

About