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Interrelationship of biases: effect investment decisions ultimately

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  • Atif KAFAYAT

    (University Institute of Management Sciences PMAS AAU, Rawalpindi, Pakistan)

Abstract

The purpose of this study is to examine if investors of Islamabad Stock Exchange are indicating tendencies of irrational behavior when exposed to certain psychological dilemmas related to the financial world and what are interrelationships among these dilemmas, This study deals with three dilemmas i.e. self-attribution bias, overconfidence bias and overoptimism bias. The main purpose of the study is to empirically prove the relationship among the biases and their effect on the rational decision making of an investor. For this study quantitative method is used and a survey is conducted. For measuring the behavioral impact on decision making, Structural Equation Modeling is used on the collected empirical data to obtain the results. The findings of this study can be useful for individual investors, financial brokers, financial manager and other financial decision makers to improve their cognitive thinking process and make more rational decisions.

Suggested Citation

  • Atif KAFAYAT, 2014. "Interrelationship of biases: effect investment decisions ultimately," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(6(595)), pages 85-110, June.
    • Handle: RePEc:agr:journl:v:xxi:y:2014:i:6(595):p:85-110
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    References listed on IDEAS

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    1. Gregory W. Brown & Michael T. Cliff, 2005. "Investor Sentiment and Asset Valuation," The Journal of Business, University of Chicago Press, vol. 78(2), pages 405-440, March.
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    Cited by:

    1. Syed Aliya Zahera & Rohit Bansal, 2018. "Do investors exhibit behavioral biases in investment decision making? A systematic review," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 10(2), pages 210-251, May.
    2. Etse Nkukpornu & Prince Gyimah & Linda Sakyiwaa, 2020. "Behavioural Finance and Investment Decisions: Does Behavioral Bias Matter?," International Business Research, Canadian Center of Science and Education, vol. 13(11), pages 1-65, November.
    3. Shashank Kathpal & Asif Akhtar & Asma Zaheer & Mohd Naved Khan, 2021. "Covid-19 and heuristic biases: evidence from India," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 26(4), pages 305-316, December.
    4. Suresh G., 2024. "Impact of Financial Literacy and Behavioural Biases on Investment Decision-making," FIIB Business Review, , vol. 13(1), pages 72-86, January.
    5. Kelikume, Ikechukwu & Evans, Olaniyi & Iyoha, Faith, 2020. "Efficient Market Hypothesis in the Presence of Market Imperfections: Evidence from Selected Stock Markets in Africa," MPRA Paper 118200, University Library of Munich, Germany.

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