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Psychological factors on irrational financial decision making: Case of day-of-the week anomaly

Author

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  • Rayenda Khresna Brahmana
  • Chee-Wooi Hooy
  • Zamri Ahmad

Abstract

Purpose - This research aims to explore and explain the determinants of irrational financial decision making, especially the day-of-the week anomaly, by using psychological approach. Design/methodology/approach - As it is a conceptual paper, this research explores the psychological biases literature and links it to the day-of-the week anomaly. Using Ellis' ABC (Activating Event, Belief, and Consequences) Model, the authors survey and classify the stimulant as the occasion that stimulates the psychological biases of investors, and these psychological biases will bring a consequence in behaviour which is irrationality in weekend effect. Findings - Adopting Ellis' ABC model, the paper constructs a theoretical framework that link the psychological biases and day-of-the week anomaly. The theoretical model is also given as a proposed model for future empirical research. Research limitations/implications - This paper contributes to research by giving the theoretical model and its framework. The latter, future research can examine the proposed psychological biases as the determinant of day-of-the week anomaly empirically. Originality/value - This paper conceptually builds a framework and derives a proposed equation model linking the psychological biases (weather, moon, attention bias, heuristic bias, regret, and cognitive bias) to the day-of-the week anomaly.

Suggested Citation

  • Rayenda Khresna Brahmana & Chee-Wooi Hooy & Zamri Ahmad, 2012. "Psychological factors on irrational financial decision making: Case of day-of-the week anomaly," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 28(4), pages 236-257, October.
  • Handle: RePEc:eme:humpps:v:28:y:2012:i:4:p:236-257
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    References listed on IDEAS

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    Cited by:

    1. Jin, L. & Ziebarth, N.R., 2015. "Sleep and Human Capital: Evidence from Daylight Saving Time," Health, Econometrics and Data Group (HEDG) Working Papers 15/27, HEDG, c/o Department of Economics, University of York.
    2. Rayenda Brahmana & Chee Wooi Hooy & Zamri Ahmad, 2014. "The Role of Weather on Investors’ Monday Irrationality: Insights from Malaysia," Contemporary Economics, University of Finance and Management in Warsaw.
    3. Woodhouse, Sam Alan & Singh, Harminder & Bhattacharya, Sukanto & Kumar, Kuldeep, 2016. "Invisible walls: Do psychological barriers really exist in stock index levels?," The North American Journal of Economics and Finance, Elsevier, vol. 36(C), pages 267-278.

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