Investor Rationality and Financial Decisions

Cohen, Gil; Kudryavtsev, Andrey

doi:10.1080/15427560.2012.653020

Cited by 49 publications

(34 citation statements)

References 9 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…They seek to attain their predetermined goals to the greatest extent with the least possible cost (Persky ). In an investment context, rational investors' utility is maximized if their wealth is maximized (Cohen and Kudryavtsev ). Venture capital investors that negotiate lower valuations hence act as rational investors, appropriating as much value in the negotiation process as possible.…”

Section: Theoretical Developmentmentioning

confidence: 99%

Valuation of Angel-Backed Companies: The Role of Investor Human Capital

Collewaert¹,

Manigart²

2015

Journal of Small Business Management

View full text Add to dashboard Cite

This article examines how angel investors' human capital affects the valuation of their portfolio companies, based on the pre-money valuation of 123 investment rounds in 58 Belgian companies. We argue that angel investors with higher levels of human capital will perceive a higher valuecreating potential in entrepreneurial opportunities through their ability to see more value-creating options, a higher value-adding potential post-investment, and an enhanced legitimacy provided to the venture. Economic theories suggest they appropriate these rents through lower valuations, whereas stewardship theory suggests they share value creation with entrepreneurs. Consistent with stewardship theory, we show angel investors negotiate higher valuations when they have higher levels of human capital, more specifically if they studied longer, have a business degree, more entrepreneurial experience, or previous professional law experience. As such, our results contrast with the behavior of venture capital investors who negotiate lower valuations when they have more experience.

show abstract

Section: Theoretical Developmentmentioning

confidence: 99%

Valuation of Angel-Backed Companies: The Role of Investor Human Capital

Collewaert¹,

Manigart²

2015

Journal of Small Business Management

View full text Add to dashboard Cite

show abstract

“…The traditional economic theory assumes that people are rational agents and make decision objectively based on their knowledge, experience and expectations and are capable of taking advantage of the opportunities available to them. However, emotional inclination, ingrained thought patterns, and the psychological biases of different human beings-that is, the behavioral paradigm of financial decision-making-describes how investors perceive the world and make investment decision [39][40][41]. Investment decision was previously followed by an ordinary triangle covering risk, liquidity, and return, however, a growing number of investors nowadays use the phenomenal square, covering liquidity, risk, return and sustainability [42].…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Environmental, Social and Governance (ESG) and Investment Decision in Bangladesh

2018

View full text Add to dashboard Cite

Abstract:As a key facet of sustainable development, environmental, social and governance (ESG) discretion on stock market investment decision is gaining prevalence following the global financial crisis. ESG considers the sustainable return, risk reduction, and accountability aspects of investments. This study is an exploration of the individual stock market investors' preferences for ESG issues and the influence that purpose of investment has on investment decision-making, by testing the investment horizon as a moderator. The theoretical background was taken from the theory of planned behavior (TPB), goal setting theory (GST), and the behavioral asset pricing model (BAPM). The study uses the sequential mix method of research, starting with an interview followed by a survey, which was conducted among individual stock market investors in Bangladesh, using simple random sampling. Structural equation modeling (SEM) analysis was carried out using Warp PLS version 6.0. The key findings of this study delineate the effect of ESG issues and the purpose of investment on investment decision-making. The contribution of the study signifies the moderating role of the investment horizon, which confirms the importance of the long-term horizon as a time and risk diversification factor. The sparse utilization of the United Nations Global Compact (UNGC) (2004) and Thomson Reuters Corporate Responsibility Index (TRCRI) (2013) as measurement scales in this study is mentioned. This study has made practical contributions for managers, investors, and regulators.

show abstract

“…Given the classic assumption of rationality, theoretically, investors should base their financial decisions upon knowledge, expectations and experience in the financial markets (Cohen and Kudryavtsev, 2012). However, rationality is imperfect in reality Kahneman, 1973, 1974) and it implies that behavioral biases might actually play a major role in investors' decision-making process (Basu, et al, 2008).…”

Section: Literature Reviewmentioning

confidence: 99%

Empirical study on conservative and representative heuristics of Hong Kong small investors adopting momentum and contrarian trading strategies

Chow

Hon

Wong

et al. 2018

IJRM

View full text Add to dashboard Cite

Abstract:Recently, a new Bayesian approach has been developed to explain some market anomalies. In this paper, we conduct a questionnaire survey to examine whether the theory holds empirically by studying the conservative and representative heuristics by Hong Kong small investors who adopt momentum and/or contrarian trading strategies. In addition, our study provides evidence for the small investors on their time horizon and risk tolerance when facing uncertainty in their investments.Our findings are useful to small investors in their investment decision making and useful to financial advisors in providing service to small investors.

show abstract

Investor Rationality and Financial Decisions

Cited by 49 publications

References 9 publications

Valuation of Angel-Backed Companies: The Role of Investor Human Capital

Valuation of Angel-Backed Companies: The Role of Investor Human Capital

Environmental, Social and Governance (ESG) and Investment Decision in Bangladesh

Empirical study on conservative and representative heuristics of Hong Kong small investors adopting momentum and contrarian trading strategies

Contact Info

Product

Resources

About