Abstract: This paper’s objective is to review behavioral finance which considers human behaviors in finance. It's a quite new area within the field of finance which has been studied for thousands of years. Behavioral finance theories support psychology and plan to understand how emotions and cognitive errors influence and manipulate individual investors’ behaviors. The most objective of this study is to research the behavioral factors influencing individual investors’ decisions at the Tehran stock market. As there are limited studies about behavioral finance in Iran, this study is predicted to contribute significantly to the event of this field in Iran. The study begins with the prevailing theories in behavioral finance, supported that hypotheses are proposed. Then, these hypotheses are tested through the questionnaires distributed randomly to individual investors at the Tehran stock exchange. SPSS software has been used to analyze the collected data. The result shows that there are many factors but we've chosen five factors that affect investment decisions like Overconfidence, Herding, Representativeness, Availability, and Anchoring-ability bias. Most of those factors have moderate impacts. This study also tries to examine the correlation between these behavioral factors and investment decisions. All the behavioral factors mentioned above are found to influence the Investment Performance: Herding (choice of trading stocks; the number of trading stocks), The heuristic behaviors like overconfidence, representativeness, anchoring, availability are found to possess a moderate impact on the investment performance while the herding behaviors are reported to influence positively on the investment performance at the lower level.
Keywords: “Behavioral Finance”, “Efficient Market Hypothesis”, “Overconfidence”, “Herd behavior”, “Anchoring”, “Representativeness”, “Availability”, “Decision making”, “Stock Exchange”.
Title: ROLE OF BEHAVIORAL FINANCE, INVESTMENT DECISION-MAKING AND PERCEIVED MARKET EFFICIENCY: A SURVEY AT TEHRAN STOCK EXCHANGE
Author: Samira Faramarzi, Valliappan Raju
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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