Biology-induced effects on investor psychology and behavior

Murphy, Austin

doi:10.1016/j.irfa.2012.07.001

Cited by 12 publications

(7 citation statements)

References 44 publications

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“…This article highlights that personality characteristics and various components of the complex set of human neurochemical systems influence individual financial risk tolerance. On the basis of this theoretical premise, Murphy (2012) provides the underlying biological explanations for time-varying risk aversion and temporal changes in expectations. The basic theoretical premise is that the brain states that are induced by internally produced biological chemicals could explain investors’ irrational behaviours which cause mispricing and inefficiency of the markets.…”

Section: Existing Theories and Empirical Evidencementioning

confidence: 99%

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Psychoanalysis of Investor Irrationality and Dynamism in Stock Market

Tuyon

Ahmad

2017

Journal of Interdisciplinary Economics

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This article provides an alternative theoretical framework to explain investors’ irrational behaviours in finance theories (mainly asset pricing) based on psychoanalysis approach. This is an approach used by psychoanalysts and psychiatrists to investigate human minds. The investigation is facilitated by interdisciplinary theories, namely (a) bounded rationality theory which differentiates intuition and reasoning, (b) prospect theory which explains framing and valuation and (c) theory of mind which divides behavioural risks into cognitive heuristics and affective biases. These theories collectively explain the origin of irrational behaviours. Additionally, (d) the ABC (Activating–Beliefs–Consequences) model is also used to interpret the causes and effects of irrational behaviours on investors and market behaviour. Last theory, (e) the dual system model of preference is used to conceptualize the bounded human mind that contains both rational and irrational elements. The proposed theoretical framework provides the theoretical foundation of investors’ irrational origin, forces, causes as well as their systematic effects on investors, asset prices and stock market behaviours dynamism. The validity of the theoretical framework is supported by empirical test using a representative of emerging stock market data and behavioural risk proxies.

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Section: Existing Theories and Empirical Evidencementioning

confidence: 99%

“…( Sociology : Baddeley, 2010; Carruthers & Kim, 2011; Fenzl & Pelzmann, 2012; Fligstein & Dauter, 2007; Frith & Singer, 2008; Preda, 2007; Seyfert, 2012; Shiller, 2002; Zafirovski, 2000). ( Biology : Murphy, 2012)].…”

Section: Existing Theories and Empirical Evidencementioning

confidence: 99%

Psychoanalysis of Investor Irrationality and Dynamism in Stock Market

Tuyon

Ahmad

2017

Journal of Interdisciplinary Economics

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“…Meanwhile, investor reaction could be underreaction or overreaction to news (Barberis et al, 1998;Lee, Shleifer, & Thaler, 1991;Baker & Wurgler, 2006). Taken all these ideas together, sentiment risk could be regarded as systematic behavioural risk that affects security values through changes in expectations and risk aversion level (Murphy, 2012). To some extent, excessive sentiment risk will cause stock market instability (Dow, 2011).…”

Section: Introductionmentioning

confidence: 99%

The Roles of Investor Sentiment in Malaysian Stock Market

Tuyon¹,

Ahmad²,

Matahir³

2016

AAMJAF

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“…However, the green bond market is still at a nascent stage. Although investors can play a critical role in the growth of this green bond market (Murphy, 2012), evidence suggests that the diversity in the investor base is significantly less. Therefore, many policies have been implemented, and many incentives have been given to stimulate this market.…”

Section: Discussionmentioning

confidence: 99%

Understanding the preference of individual retail investors on green bond in India: An empirical study

Prajapati

Paul

Malik

et al. 2021

Investment Management and Financial Innovations

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The biggest challenge facing countries, including India, is creating and managing an LCR (low carbon resilient) economy, which balances the need for high growth rates and is environmentally sustainable. The green bond market provides investors the means to help change the economy into an LCR economy. The study was undertaken to understand the key drivers and the factors influencing the individual retail investor’s decision to invest in green bonds. A survey instrument was designed and administered through the snowball sampling technique to 125 Indian respondents of various age groups who were eligible to invest in the Indian bond market. SPSS software was used to conduct a descriptive analysis followed by regression and conjoint analyses. The study results suggest that the Environmental, Social, and Governance (ESG) rating and credit rating of the green bond issuers are the key factors that influence an individual’s investment decision. The findings also highlight that incentives such as tax exemptions and awareness of green bonds also affect an investor’s decision. This research stands out as one of the first attempts to understand the Indian retail investors’ perception of a green bond.

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Biology-induced effects on investor psychology and behavior

Cited by 12 publications

References 44 publications

Psychoanalysis of Investor Irrationality and Dynamism in Stock Market

Psychoanalysis of Investor Irrationality and Dynamism in Stock Market

The Roles of Investor Sentiment in Malaysian Stock Market

Understanding the preference of individual retail investors on green bond in India: An empirical study

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