An Exploratory Inquiry into the Psychological Biases in Financial Investment Behavior Evidence from Pakistani Financial Markets
Abstract
Purpose: This research aims to explore the psychological biases in the investment behavior of Pakistani investors, which refers to the natural inclination of investors towards specific financial products based on certain perceptions developed through information or news relating to the issuer of financial products
Design/Methodology/Approach: A sample of twelve actively participating investors were selected in this research contacted through telephone in which the conversations were tape-recorded with the consent of the interviewee. It was then transcribed and coded into Ms. Word, or themes were developed.
Findings: Thematic analysis was conducted over the responses received; the results suggest that due to lack of training, knowledge relating to an investment in financial products, the behavior of investors is highly biased; partly either because of their association in the form of employment with issuing authorities or because of the news or information floated relating to financial products of the various companies.
Implications/Originality/Value: The study has many practical implications; the financial managers and consultants can design financial management behavior practical learning approach to reduce biases. Also, stock stockbrokers, investors identify such biases and reduce their impact. Furthermore, this study highlights the philosophical paradigm through ontological and epistemological understanding.
Downloads
Article Analytics Summary
References
Alfred, Lord Tennyson Bias, S. (1880). Self-Control Bias. 211–222
Awais, M., Fahad Laber, M., Rasheed, N., & Khursheed, A. (2016). Impact of financial literacy and investment experience on risk tolerance and investment decisions: Empirical evidence from Pakistan. International Journal of Economics and Financial Issues, 6(1), 73–79.
Bias, R. A. (2015). Regret Aversion Bias. Behavioral Finance and Wealth Management, 243–251. https://doi.org/10.1002/9781119202400.ch22 DOI: https://doi.org/10.1002/9781119202400.ch22
Duclos, R. (2014). The psychology of investment behavior: (De)biasing financial decision-making one graph at a time. Journal of Consumer Psychology, 25(2), 317–325. https://doi.org/10.1016/j.jcps.2014.11.005 DOI: https://doi.org/10.1016/j.jcps.2014.11.005
Hilgert, M., Hogarth, J., & Beverly, S. (2003). Household financial management: the connection between knowledge and behavior. Federal Reserve Bulletin, 106(Jul), 309–322.
Khresna Brahmana, R., Hooy, C., & Ahmad, Z. (2012). Psychological factors on irrational financial decision making: Case of the dayofthe week anomaly. Humanomics, 28(4), 236–257. https://doi.org/10.1108/08288661211277317 DOI: https://doi.org/10.1108/08288661211277317
Kubilay, B., & Bayrakdaroglu, A. (2016). An Empirical Research on Investor Biases in Financial Decision-Making, Financial Risk Tolerance, and Financial Personality. International Journal of Financial Research, 7(2), 171–182. https://doi.org/10.5430/ijfr.v7n2p171 DOI: https://doi.org/10.5430/ijfr.v7n2p171
Marchand, M. (2012). Behavioral biases in financial decision-making. 8200, 1–28.
Madaan, G., & Singh, S. (2019). An analysis of behavioral biases in investment decision-making. International Journal of Financial Research, 10(4), 55–67. https://doi.org/10.5430/ijfr.v10n4p55 DOI: https://doi.org/10.5430/ijfr.v10n4p55
Mühl, J. K. (2014). Research methodology. Contributions to Management Science, 75–100. https://doi.org/10.1007/978-3-319-04069-1_4 DOI: https://doi.org/10.1007/978-3-319-04069-1_4
N, S. (2015). Heuristic and Biases Related To Financial Investment and the Role of Behavioral Finance in Investment Decisions – a Study. ZENITH International Journal of Business Economics & Management Research, 5(12), 82–101. https://doi.org/10.1108/01443570310501907
Nowell, L. S., Norris, J. M., White, D. E., & Moules, N. J. (2017). Thematic Analysis: Striving to Meet the Trustworthiness Criteria. International Journal of Qualitative Methods, 16(1), 1–13. https://doi.org/10.1177/1609406917733847 DOI: https://doi.org/10.1177/1609406917733847
N, S. (2015). Heuristic and Biases Related To Financial Investment and the Role of Behavioral Finance in Investment Decisions – a Study. ZENITH International Journal of Business Economics & Management Research, 5(12), 82–101. https://doi.org/10.1108/01443570310501907 DOI: https://doi.org/10.1108/01443570310501907
Sahi, S. K., Arora, A. P., & Dhameja, N. (2013). An Exploratory Inquiry into the Psychological Biases in Financial Investment Behavior. Journal of Behavioral Finance, 14(2), 94–103. https://doi.org/10.1080/15427560.2013.790387 DOI: https://doi.org/10.1080/15427560.2013.790387
Sindhu, A. (2012). Chapter 2 : Research Methodology Chapter 2 : Research Methodology. 6–16. https://repository.up.ac.za/bitstream/handle/2263/24260/02chapter2.pdf?sequence=3
Soiferman, L.K. (2010). Inductive and Deductive Research Approaches. April 1–23.
Simon, M. K. (2011). Assumptions, limitations, and delimitations. http://dissertationrecipes.com/wp-content/uploads/2011/04/AssumptionslimitationsdelimitationsX.pdf
Thomas A. Schwandt. (1998). Schwandt.pdf (p. 189). DOI: https://doi.org/10.1002/ev.1091
Vera-Toscano, E., Ateca-Amestoy, V., & Serrano-del-Rosal, R. (2006). Building financial satisfaction. Social Indicators Research, 77(2), 211–243. https://doi.org/10.1007/s11205-005-2614-3 DOI: https://doi.org/10.1007/s11205-005-2614-3
Copyright (c) 2021 Hussain Khawaja, Jameel Ahmed Khan, Noor Muhammad Jamali

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
CSRC Publishing and JAFEE adhere to Creative Commons Attribution-Non Commercial 4.0 International License. The authors, submitting and publishing in the Journal of Accounting and Finance in Emerging Economies published by CSRC Publishing, retain the copyright of their work and give the journal right to publish their work agreeing to the licensing policy under Creative Common Attribution-Non Commercial (NC-BY-NC 4.0) International. Under this license, the published authors let others remix, tweak, and build upon their work non-commercially. Yet all the other authors using the content of CSRC Publishing are required to cite author(s), journal name and publisher in their work. CSRC Publishing and JAFEE follow an Open Access Policy for copyright and licensing.