BEHAVIORAL FACTORS INFLUENCING INVESTMENT DECISIONS: A SYSTEMATIC REVIEW USING PRISMA
Keywords:
Behavioral Biases, Behavioral Factors, Investment Decisions, Behavioral Finance, Cognitive Biases.
Abstract
The purpose of this systematic review is to analyze the previous study made in the past related to an association between behavioral biases and investment decisions. This systematic review article identified 21 distinct biases affecting the investment decisions made by investors. Data were collected from 3 databases (Scopus, Taylor and Francis, and Web of Science) using PRISMA guidelines. The inclusion criteria for this systematic review were (i) publication date 2012 to 2022 (ii) published in the English language (iii) open access articles (iv) all types of documents except review articles etc. The findings of the study support that there is a significant relationship between 21 distinct behavioral biases and investment decisions. The study found there is a lack of female participants to male participants. There is a sampling bias found in many studies i.e., the studies employed non-probability techniques to collect samples. This study extends the current knowledge about the previous study being researched related to an association between behavioral biases and investment decisions. This systematic review provides a clear picture of the gaps in the previous literature. This study is helpful for researchers and academicians in understanding the biases investors undergo while making investment decisions and addressing the gaps identified related to different types of behavioral biases and areas of study that need to be explored more in near future.
JEL Classification Codes: D91, G10, G4, G11, G41.
References
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Niehaus, G., & Shrider, D. G. (2014). Framing and the disposition effect: evidence from mutual fund investor redemption behaviour. Quantitative Finance,14(4), 683-697. https://doi.org/10.1080/14697688.2013.819114
Nurbarani, B. S., & Soepriyanto, G. (2022). Determinants of Investment Decision in Cryptocurrency: Evidence from Indonesian Investors. Universal Journal of Accounting and Finance, 10(1), 254–266. https://doi.org/10.13189/ujaf.2022.100126
Paisarn, W., Chancharat, N., & Chancharat, S. (2021). Factors Influencing Retail Investors’ Trading Behaviour in the Thai Stock Market. The Australasian Accounting Business and Finance Journal, 15(2), 26–37. https://doi.org/10.14453/aabfj.v15i2.3
Parveen, S., Satti, Z. W., Subhan, Q. A., & Jamil, S. (2020). Exploring market overreaction, investors’ sentiments and investment decisions in an emerging stock market. Borsa Istanbul Review, 20(3), 224–235. https://doi.org/10.1016/j.bir.2020.02.002
Prosad, J. M., Kapoor, S., & Sengupta, J. (2015). Behavioral biases of Indian investors: a survey of Delhi-NCR region. Qualitative Research in Financial Markets, 7(3), 230–263. https://doi.org/10.1108/qrfm-04-2014-0012
Qasim, M., Hussain, R. Y., Mehboob, I., & Arshad, M. (2019). Impact of herding behavior and overconfidence bias on investors’ decision-making in Pakistan. Accounting, 5, 81–90. https://doi.org/10.5267/j.ac.2018.7.001
Rzeszutek, M., Szyszka, A., & Czerwonka, M. (2015). Investors’ Expertise, Personality Traits and Susceptibility to Behavioral Biases in the Decision Making Process. Contemporary Economics, 9(3), 337–352. https://doi.org/10.5709/ce.1897-9254.173
Sharma, M., & Firoz, M. (2020). Do Investors’ Exhibit Cognitive Biases: Evidence From Indian Equity Market. International Journal of Financial Research. 11(2), 26-39. https://doi.org/10.5430/ijfr.v11n2p26
Taffler, R., Spence, C., & Eshraghi, A. (2017). Emotional economic man: Calculation and anxiety in fund management. Accounting Organizations and Society, 61, 53–67. https://doi.org/10.1016/j.aos.2017.07.003
Talwar, S., Talwar, M., Tarjanne, V., & Dhir, A. (2021). Why retail investors traded equity during the pandemic? An application of artificial neural networks to examine behavioral biases. Psychology & Marketing, 38(11), 2142–2163. https://doi.org/10.1002/mar.21550
Ullah, S., & Elahi, M. A. (2014). Behavioral Biases in Investment Decision Making and Moderating Role of Investor’s Type. Social Science Research Network. Retrieved from https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2618387_code1617678.pdf?abstractid=2618387&mirid=1
Winne, R. (2021). Measuring the disposition effect. Journal of Behavioral and Experimental Finance, 29, 100468. https://doi.org/10.1016/j.jbef.2021.100468
Wu, S. W., Dutta, J., & Huang, C. (2018). The systematic biases in decision-making in the mutual-fund markets: Market states and disposition effect. Cogent Economics & Finance, 6(1), 1537538. https://doi.org/10.1080/23322039.2018.1537538
Zhdanov, V., & Simonov, A. (2021). Sell Winners and Buy Losers? The Impact of Familiarity on Individual Investors’ Decision-Making: Experimental Results. International Journal of Financial Studies, 9(3), 47. https://doi.org/10.3390/ijfs9030047
Adil, M., Singh, Y., & Ansari, M. N. (2021). How financial literacy moderate the association between behaviour biases and investment decision? AJAR (Asian Journal of Accounting Research), 7(1), 17–30. https://doi.org/10.1108/ajar-09-2020-0086
Akgül, E. F., & Cetin, I. B. (2021). An investigation on behavioral biases in ship investments of small-sized shipping companies. Maritime Business Review, 6(4), 377-391. https://doi.org/10.1108/mabr-08-2020-0049
Almansour, B. Y. (2020). Cryptocurrency Market: Behavioral Finance Perspective. The Journal of Asian Finance, Economics and Business, 7(12), 159–168. https://doi.org/10.13106/jafeb.2020.vol7.no12.159
Annamalah, S., Raman, M., Marthandan, G., & Logeswaran, A. K. (2019). An Empirical Study on the Determinants of an Investor’s Decision in Unit Trust Investment. Economies, 7(3), 80. https://doi.org/10.3390/economies7030080
Bouteska, A., & Regaieg, B. (2018). Investor characteristics and the effect of disposition bias on the Tunisian stock market. Borsa Istanbul Review, 18(4), 282–299. https://doi.org/10.1016/j.bir.2018.05.004
Gupta, S., & Shrivastava, M. (2021). Herding and loss aversion in stock markets: mediating role of fear of missing out (FOMO) in retail investors. International Journal of Emerging Markets, 17(7), 1720–1737. https://doi.org/10.1108/ijoem-08-2020-0933
Hafez, H. M. (2021). Investigating the psychological factors that affect Egyptian investors’ behaviour and decisions before and after the pandemic. Journal of Governance and Regulation, 10(4), 113–129 https://doi.org/10.22495/jgrv10i4art10
Hala, Y., Abdullah, M., Andayani, W., Ilyas, G. B., & Akob, M. (2020). The Financial Behavior of Investment Decision Making Between Real and Financial Assets Sectors. The Journal of Asian Finance, Economics and Business, 7(12), 635–645. https://doi.org/10.13106/jafeb.2020.vol7.no12.635
Kamran, H. W., Qaisar, A., Sultana, N., Nawaz, M., & Ahmad, H. F. (2020). Factors Influencing the Investor’s Decision Making: The Moderating Role of Locus of Control. The Journal of Asian Finance, Economics and Business, 7(12), 535–543. https://doi.org/10.13106/jafeb.2020.vol7.no12.535
Kartika, T. R., Saputra, N., Tjahjana, D. D. D. P., & Manurung, A. H. (2022). Stock Investment Decision: The Effects of Personal Factors and Moderating Role of Years of Service. WSEAS Transactions on Business and Economics, 19, 107–115. https://doi.org/10.37394/23207.2022.19.11
Khilar, R. P., & Singh, S. (2019). Influence of Behavioural Biases on Investment Decision Making in Bhubaneswar Region. International Journal of Recent Technology and Engineering, 8(3), 8297–8301. https://doi.org/10.35940/ijrte.c6592.098319
Kumar, S., & Goyal, N. (2015). Behavioural biases in investment decision making – a systematic literature review. Qualitative Research in Financial Markets, 7(1), 88–108. https://doi.org/10.1108/qrfm-07-2014-0022
Kunjal, D. (2021). Investor overconfidence in the South African exchange traded fund market. Cogent Economics & Finance, 9(1), 1978190. https://doi.org/10.1080/23322039.2021.1978190
Madaan, G., & Singh, S. S. A. (2019). An Analysis of Behavioral Biases in Investment Decision-Making. International Journal of Financial Research, 10(4), 55. https://doi.org/10.5430/ijfr.v10n4p55
Mishra, P. C., & Mishra, S. (2021). Do Banking and Financial Services Sectors Show Herding Behaviour in Indian Stock Market Amid COVID-19 Pandemic? Insights from Quantile Regression Approach. Millennial Asia, 14(1), 54–84. https://doi.org/10.1177/09763996211032356
Moueed, A., & Hunjra, A. I. (2020). Use anger to guide your stock market decision-making: results from Pakistan. Cogent Economics & Finance, 8(1), 1733279. https://doi.org/10.1080/23322039.2020.1733279
Nair, V.R., Antony, A. (2015). Evolution and challenges of Behavioral Finance. International journal of science and Reaserch, 4(3),1055-1059. Retrieved from https://www.researchgate.net/profile/Anu-Antony-7/publication/332933509_Evolutions_and_Challenges_of_Behavioral_Finance/links/5cd263b0a6fdccc9dd939ca1/Evolutions-and-Challenges-of-Behavioral-Finance.pdf
Ng, S. H., Zhuang, Z., Toh, M., Ong, T., & Teh, B. (2022). Exploring herding behavior in an innovative-oriented stock market: evidence from ChiNext. Journal of Applied Economics, 25(1), 523–542. https://doi.org/10.1080/15140326.2022.2050992
Niehaus, G., & Shrider, D. G. (2014). Framing and the disposition effect: evidence from mutual fund investor redemption behaviour. Quantitative Finance,14(4), 683-697. https://doi.org/10.1080/14697688.2013.819114
Nurbarani, B. S., & Soepriyanto, G. (2022). Determinants of Investment Decision in Cryptocurrency: Evidence from Indonesian Investors. Universal Journal of Accounting and Finance, 10(1), 254–266. https://doi.org/10.13189/ujaf.2022.100126
Paisarn, W., Chancharat, N., & Chancharat, S. (2021). Factors Influencing Retail Investors’ Trading Behaviour in the Thai Stock Market. The Australasian Accounting Business and Finance Journal, 15(2), 26–37. https://doi.org/10.14453/aabfj.v15i2.3
Parveen, S., Satti, Z. W., Subhan, Q. A., & Jamil, S. (2020). Exploring market overreaction, investors’ sentiments and investment decisions in an emerging stock market. Borsa Istanbul Review, 20(3), 224–235. https://doi.org/10.1016/j.bir.2020.02.002
Prosad, J. M., Kapoor, S., & Sengupta, J. (2015). Behavioral biases of Indian investors: a survey of Delhi-NCR region. Qualitative Research in Financial Markets, 7(3), 230–263. https://doi.org/10.1108/qrfm-04-2014-0012
Qasim, M., Hussain, R. Y., Mehboob, I., & Arshad, M. (2019). Impact of herding behavior and overconfidence bias on investors’ decision-making in Pakistan. Accounting, 5, 81–90. https://doi.org/10.5267/j.ac.2018.7.001
Rzeszutek, M., Szyszka, A., & Czerwonka, M. (2015). Investors’ Expertise, Personality Traits and Susceptibility to Behavioral Biases in the Decision Making Process. Contemporary Economics, 9(3), 337–352. https://doi.org/10.5709/ce.1897-9254.173
Sharma, M., & Firoz, M. (2020). Do Investors’ Exhibit Cognitive Biases: Evidence From Indian Equity Market. International Journal of Financial Research. 11(2), 26-39. https://doi.org/10.5430/ijfr.v11n2p26
Taffler, R., Spence, C., & Eshraghi, A. (2017). Emotional economic man: Calculation and anxiety in fund management. Accounting Organizations and Society, 61, 53–67. https://doi.org/10.1016/j.aos.2017.07.003
Talwar, S., Talwar, M., Tarjanne, V., & Dhir, A. (2021). Why retail investors traded equity during the pandemic? An application of artificial neural networks to examine behavioral biases. Psychology & Marketing, 38(11), 2142–2163. https://doi.org/10.1002/mar.21550
Ullah, S., & Elahi, M. A. (2014). Behavioral Biases in Investment Decision Making and Moderating Role of Investor’s Type. Social Science Research Network. Retrieved from https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2618387_code1617678.pdf?abstractid=2618387&mirid=1
Winne, R. (2021). Measuring the disposition effect. Journal of Behavioral and Experimental Finance, 29, 100468. https://doi.org/10.1016/j.jbef.2021.100468
Wu, S. W., Dutta, J., & Huang, C. (2018). The systematic biases in decision-making in the mutual-fund markets: Market states and disposition effect. Cogent Economics & Finance, 6(1), 1537538. https://doi.org/10.1080/23322039.2018.1537538
Zhdanov, V., & Simonov, A. (2021). Sell Winners and Buy Losers? The Impact of Familiarity on Individual Investors’ Decision-Making: Experimental Results. International Journal of Financial Studies, 9(3), 47. https://doi.org/10.3390/ijfs9030047
Published
2023-02-28
How to Cite
Sinha, A., & Shunmugasundaram, V. (2023). BEHAVIORAL FACTORS INFLUENCING INVESTMENT DECISIONS: A SYSTEMATIC REVIEW USING PRISMA. International Journal of Accounting & Finance Review, 14(1), 40-52. https://doi.org/10.46281/ijafr.v14i1.1968
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2023 Aashna Sinha, V Shunmugasundaram
This work is licensed under a Creative Commons Attribution 4.0 International License.
