The disposition effect is one of the most prominent and widely studied behavioral biases observed among investors. It describes the tendency to close out winning investments prematurely while holding ...on to losing ones for too long and is generally associated with reduced investment returns. Researchers have explored various debiasing strategies and interventions to mitigate the disposition effect and its detrimental impact on returns. We summarize a between-subject experiment with
n
= 132 UK participants testing the impact of an informational feedback-like intervention to mitigate the disposition effect, informing participants about the disposition effect. Moreover, we re-examine our intervention's impact in the follow-up measurements which are 2 weeks and again 3 months after the first measurement. We find our intervention to have a significant impact, reducing the disposition effect in the first measurement. In addition, we still find a significant impact of the intervention, reducing the disposition effect after 2 weeks, while no significant impact is observed at the 3-month point. While we find a higher disposition effect to be associated with lower returns for one measurement, the opposite is true for the other two measurements. Moreover, the intervention had a return reducing impact for one measurement and no significant impact for the other two. Overall, our study shows a promising intervention that may be readily deployed among retail investors with a somewhat lasting impact to mitigate the disposition effect. However, our study also shows that the relationship between the disposition effect and investment returns is nuanced.
Introduction
Socially responsible investments (SRI) increased their popularity among investors over the last two decades. However, there is still a lack of knowledge on socially responsible ...investors' characteristics and motivations behind the decision to invest in SRI. The present paper aims at filling this gap by profiling current and potential sustainable investors.
Method
Cross-sectional data from a representative sample of Italian consumers (N = 1,002) was used to perform a Latent Profile Analysis (LPA), a clustering technique, and identify various sub-groups within the respondents. Subsequently, chi-square test and one-way ANOVA were performed to determine which profile(s) was mostly associated with current and potential socially responsible investing.
Results and discussion
Five profiles of consumers were identified through the LPA, each one differently associated with the likelihood of investing in socially responsible products. The profile that best describes sustainable investors is characterized by high levels of knowledge toward SRI, risk appetite, positive attitudes on SRI, personal norms, perceived behavioral control, environmental concerns, and connectedness to nature. These findings suggest that non-financial aspects, namely psychological characteristics such as attitudes and personal values, play a key role in the decision to invest responsibly as well.
The economic fallout from COVID-19 pandemic changes individuals’ investment perceptions and behaviors in a tremendous way. Consequently, investment decision-making has been affected as people have to ...adjust to the new environment. This study aims to study whether COVID-19 really make people risk aversion due to the economic slowdown. Our empirical results are analyzed from household finance data in U.S in July 2021. It is found that COVID-19 proximity, income, and occupation are positively associate with risking taking in investment decision-making, while age and family size are not. This study contributes to the newly emerged body of knowledge on post pandemic investment decision-making and risk behavior analysis and provide implications for financial investment institutions.
In this study, we investigate the role of decision-making and coordination related to carbon reduction within humanitarian supply chain. Accordingly, a two-stage supply chain consisting of a single ...manufacturer and a single retailer has been designed, within which three strategies for carbon emission reduction have been considered, namely direct procurement of carbon emission right, investment in fixed carbon reduction targets, and investment in reducing carbon emissions per unit product. The game model under decentralized decision-making, centralized decision-making, and coordinative status has been established. The influences of both consumer carbon sensitivity coefficient and carbon trading price on investment decision based on carbon emission reduction within supply chains, as well as the optimal decision of supply chain operations, are all discussed in this paper. Our study shows that the choice of supply chain carbon reduction strategies depends on carbon trading price and fixed emission reduction target, both the wholesale price and selling price of products are positively correlated with carbon trading price, and both optimal production volume of supply chain and optimal expected profit of supply chain operations are negatively correlated with consumer carbon sensitivity coefficient. The price discount contract may realize coordination within a supply chain, but the value of discount price depends on respective negotiation ability.
This study analyses heuristic factors affecting investor sentiment and investment decision-making in the Indian stock market. A quantitative approach is formulated with the questionnaire design for ...the collection of primary data regarding investor sentiment, representativeness heuristic bias, overconfidence and availability bias. The data are collected from the structured questionnaires from individual investors. The collected data were analysed using partial least square structural equation modelling to examine the relationship between the constructs: investor sentiment, representativeness heuristic bias, overconfidence and availability bias. This paper provides empirical insights into the association of heuristic factors that positively influence investor sentiment and investment decision-making. It encourages investors to make reasonable choices and to control and understand their risk. The study sheds light on the impact of investor sentiment on investment decision-making and its antecedent. It shows that investors depend on sentiment when making investment choices. Policymakers should provide consumers with knowledge and appreciation of the correct stock choice; various campaigns considering the different groups of investors will benefit decision-makers and institutional financial practitioners. This paper allows investors to pick the proper investment assistance to avoid making wrong decisions that arise as an outcome of the attitude of investors.
We examine the influence of financial asset historical price path characteristics on investors’ risk perception, return beliefs and investment propensity. To that end, we run a series of survey ...experiments in which we present various price patterns to individuals with vested interest in financial matters. Our findings reveal that price paths with identical daily and monthly returns (and consequently identical return standard deviation) can lead to substantially different risk perception by investors, indicating that historical volatility is insufficient to explain risk perception. Salient features such as highs, lows and crashes are the most influential drivers of perceived risk in price paths. Return forecasts are primarily driven by past overall returns and the most recent price developments. Perceived risk and return beliefs strongly predict investment propensity.
Building on social-psychological insights into social perception and judgment and empirical findings from the entrepreneurship literature, we propose that early-stage equity investors look at two ...main dimensions to assess entrepreneurs seeking early-stage financing: competence and cooperativeness. In all, 84 angel investors and venture capitalists active in Europe participated in a conjoint experiment. The results show that investors prioritize entrepreneurs’ competence over their cooperativeness. Entrepreneurs’ competence is even more appealing to investors when combined with coachability. We find that entrepreneurs can compensate for a lack of experience by demonstrating solid market knowledge and appearing to be coachable. Furthermore, the results suggest that investors differ in their consideration of entrepreneurs’ cooperativeness, but not competence, when making investment decisions—a finding that is conditional on investors’ usual level of involvement in their portfolio ventures. We discuss these findings from a theoretical and practical perspective.
This study aims to test accounting knowledge, knowledge of financial feasibility analysis, and financial feasibility support systems for making investment decisions in Micro, Small, and Medium ...Enterprises (MSMEs). The population of this research is the Lasem Batik SMEs. The sampling technique used in this study was purposive sampling. The samples obtained were 44 UMKM. The data analysis technique used in this research was multiple linear regression analysis. The results of this study indicate that accounting knowledge has an effect on the investment decision-making process, but knowledge of financial feasibility analysis and the financial feasibility support system have no effect on the investment decision-making process. The findings of this study can be used to support MSMEs in making investment decisions.
Purpose- This study proposes to identify the certain biases affecting investor decision-making and to segment investors accordingly.
Design/Methodology- A quantitative research method was applied to ...measure the existence and impact of the biases on investment decision-making. A survey was administered among the stock market investors in Uttar Pradesh. Factor analysis was used to extract those biases that significantly impact investment decision-making and their mean score to assess the level of agreement that affects their investment decisions.
Findings - The finding reveals that eight extracted factors affect the investment decisions and accordingly segment them on the biases they exhibit. The investors tend to fall into Imitator, Stereotypical, Independent Individualist, Risk Intolerant, Efficient Planner, Confident, Passive, and Competent Confirmer. The Imitators, Independent Individualists, and Confident investors show their higher level of agreement that highly affects their equity investment decision-making.
Practical Implication- This study provides a base to segment the investors on their biases. In addition, it will help in customizing the investment recommendation based on their biases to improve the investment decisions.
Purpose
Stock markets are considered as the largest and most important units for the development and growth of the economy. The present study attempts to provide a comprehensive view of factors ...influencing investment decision making process of stock market investors. A multi group analysis of gender is also carried out on the proposed model.
Design/methodology/approach
The data of 402 valid responses are collected through structured questionnaires from individual investors of North India. SPSS 23 is used to do the descriptive analysis and AMOS 22 is used to establish the validity of the constructs and for hypotheses testing. For performing multi group analysis, several invariance tests have also been conducted to check the robustness of the model.
Findings
The results reveal that all the factors such as firm image, accounting information, neutral information, advocate recommendation and personal financial needs significantly influence investment decision making concluding image of the firm being the most influential factor and advocate recommendation being the least influential factor for investment decisions. No significant differences between males and females were found.
Research limitations/implications
The current study suffers from the limitation of restricted geographical area of North India. Moreover, there is also a scope to incorporate more demographic factors for predicting investment decisions.
Originality/value
This study incorporates a range of factors which covers all the aspects of investment decision making. This study also highlights the notion of signaling theory, thus contributing to the limited literature in Indian context.
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