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Behavioral Bias in Individual Investment Decisions: Is It a Common Phenomenon in Stock Markets?

Author

Listed:
  • Nawal Hussein Abbas Elhussein
  • Jarel Nabi Ahmed Abdelgadir

Abstract

This paper aims to investigate the behavioral factors that influence individual investment decision making at a developing country stock market; the Sudanese Stock Exchange Market. The Study employs a cross-sectional survey design as well as analytical methods to collect the necessary data and establish the relationship between the study variables. Data is collected through a structured questionnaire from a sample of 203 individual investors and Correlation and Regression methods are used to conduct the analysis. The findings of the paper provide evidence that behavioral biases play a noticeable role in individual investment decision making process regardless of the degree of development of the stock market. The paper demonstrates that heuristic and market factors play a dominant role in the process of individual decision making in the Khartoum Stock Exchange. The factors that have a significant impact on individual investment decision making process include Representativeness, Overconfidence, Anchoring, Historical cost of stock, Customer preferences, Loss aversion, Mental accounting, Other investors¡¯ trading volume, and Quick reaction to changes in other investors ¡®decisions. Factors that have an insignificant impact include Availability bias, Change in stock prices, Regret aversion, and Other investors¡¯ decisions and choices.

Suggested Citation

  • Nawal Hussein Abbas Elhussein & Jarel Nabi Ahmed Abdelgadir, 2020. "Behavioral Bias in Individual Investment Decisions: Is It a Common Phenomenon in Stock Markets?," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(6), pages 25-36, December.
    • Handle: RePEc:jfr:ijfr11:v:11:y:2020:i:6:p:25-36
    DOI: 10.5430/ijfr.v11n6p25
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    References listed on IDEAS

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