International Journal of Organizational Leadership 7(2018) 284-299
16 PagesPosted: 11 Mar 2019
Date Written: August 24, 2018
Abstract
Behavioral finance is precisely non-rational behavior of market investors. Behavioral finance theory shows that investors make investment decisions rationally, by intermittent change from the past and that investment decisions can be taken under the influence of some psychological factors. This theory shows how human behaviors are effective in the functioning of investment decisions and that investment decisions can be made in nonrational behaviors. People are determined to invest under the influence of emotions and personal intuitions with models based on rational behavior and investment behaviors. Whether individuals are rational in the economic decision-making process is one of the key points of debate and it seems quite complex to be able to demonstrate this. This study will focus on individuals (investors), one of the economic decision makers. Socio-economic factors, as well as psychological factors, influence the risk that investors perceive in the decision-making process of individual investors. The purpose of this study is to identify stimuli that affect individual investors' drivers of financial investment decisions and to consider it in terms of behavioral finance. For this purpose, an individual investor questionnaire has been determined in the field which has previously been validated and reliable. This questionnaire was applied to 200 employees working in private and public banks operating in Aksaray and 177 people were provided feedback. In the case of Aksaray, it has been determined which stimulants are under the influence of predictions, estimates, emotions, personal intuitions, psychological and sociological behaviors of investment decision-making individuals.
Keywords: Behavioral Finance, Individual Investors, Investment Decisions and Socio-Economic Factors
Suggested Citation:Suggested Citation
USLU DİVANOĞLU, Sevilay and BAĞCI, Dr. Haşim, Determining the Factors Affecting Individual Investors’ Behaviours (August 24, 2018). International Journal of Organizational Leadership 7(2018) 284-299 , Available at SSRN: https://ssrn.com/abstract=3337585
Aksaray University
Aksaray
Turkey
Aksaray University - Department of Business Administration ( email )
Turkey
FAQs
As individual investors make investment decisions, it is necessary to analyze and evaluate which factors are influenced by them. Individual investors are under the influence of three main factors, personal, financial and environmental, while making investment decisions.
What are the determinants of investment Behaviour of individual investors? ›
These factors can be loss aversion, overconfidence, heuristics, representative bias, herding, anchoring, availability, etc. However, when researching new investors in the Vietnamese stock market, Nguyen et al. (2022) show that the factor of personal confidence affects their decisions.
What are the Behavioural factors affecting investment decision making? ›
To address this shortcoming, behavioral finance theories emphasize the impact of cognitive biases, such as overconfidence, loss aversion, and herd mentality, on investors' decision-making processes, which can lead to irrational investment choices.
Which factors will affect an individual's investment strategy? ›
Your investment strategy depends on your personal circ*mstances, including your age, capital, risk tolerance, and goals. Investment strategies range from conservative to highly aggressive, and include value and growth investing. You should reevaluate your investment strategies as your personal situation changes.
What are the factors affecting individual behaviour? ›
Behaviour is affected by factors relating to the person, including: physical factors - age, health, illness, pain, influence of a substance or medication. personal and emotional factors - personality, beliefs, expectations, emotions, mental health. life experiences - family, culture, friends, life events.
Which of the following factors is important for investor behaviour? ›
Additionally, making an investment decision requires taking into account a number of important factors, including your personal financial objectives, risk tolerance, and budgeting abilities.
What are the behavioral factors affecting decision-making? ›
Decision-making does not exist in a bubble but is influenced by factors that sway behavior. Examine the effects of cognitive dissonance, risk propensity, escalation of commitment, and values on peoples' decision-making.
What are the factors that influence investment decisions of an individual? ›
Given below are the various factors that influence decisions:
- Investment objective.
- Return on investment.
- Return frequency.
- Involved risks.
- Maturity period.
- Tax benefit.
- Volatility.
- Liquidity.
Specifically, it focuses on four prevalent behavioral biases: loss aversion, endowment bias, framing bias, and overconfidence bias, examining how these biases can lead to potential investment mistakes or risks. To mitigate the influence of behavioral biases, the study proposes several strategies.
What are the two most important factors influencing investor? ›
The two things that separate successful investors from losers is 1) a long horizon and 2) consistency.
Factor style investing, has become prominent in recent years as investors seek to enhance portfolio returns and diversification while keeping volatility low. Factor investing is the strategy of targeting securities with specific characteristics such as value, quality, momentum, size, and minimum volatility.
What factors influence your investment decisions for clients? ›
Let us take a look at a few such factors that you must consider while making an investment decision.
- Reason of investment. The first, and most important thing to consider is the reason for making an investment. ...
- Researching the market. ...
- Risk levels. ...
- Investment Tenure. ...
- Taxations. ...
- Liquidity. ...
- Volatility. ...
- The Company.
A consumer's buyer behaviour is influenced by four major factors: Cultural, Social, Personal and Psychological. Cultural factors include a consumer's culture, subculture and social class. These factors are often inherent in our values and decision processes.
