Do Individual Investors Affect Share Price Accuracy? Some Preliminary Evidence

Evans, Alicia Davis

doi:10.2139/ssrn.998093

Cited by 1 publication

(1 citation statement)

References 58 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…There is a widespread perception that individual investors do not have an important role in driving the stock prices (Friedman, 1953), but this view has come under attack (Kogan et al, 2006), from researchers who have found that such "irrational" individual investors often trade in stocks as a herd (Kumar & Lee, 2006), and may lead to an overvaluation or undervaluation of the securities, over a prolonged period of time (Hvidkjaer, 2008). The trade among individual investors also has an important role on market efficiency (Davis, 2011), proving that the investment habits of individuals investors also deserve to be studied as extensively as the role of institutional investors in financial markets is. While there is growing awareness about behavioral finance, an actionable model is yet to be developed.…”

Section: Discussionmentioning

confidence: 99%

The Impact of Behavioral Biases on Individuals’ Financial Choices under Uncertainty: An Empirical Approach

Banerji

Kundu

Alam

2022

Business Perspectives and Research

View full text Add to dashboard Cite

All human beings are limited by their knowledge and interpretative abilities, leading them to rely on more simplifications to make the decision-making more tractable. Kahneman and Tversky’s landmark work recognized that individuals’ choices often systematically deviate from the neo-classical expectations of rationality, and such deviations are known as behavioral biases. This article aims to examining how the behavioral biases relate to each other and impact the investment decision of individuals. The relationships between behavioral biases may be used to develop certain profiles of financial behavior, which the finance agents can use to provide more custom choices to their clients. The population for this study was the individual investors of the Indian financial markets and any individuals who may be prospective investors. A research instrument was created, for the sake of studying such association, the pilot survey of which revealed the items which were most reliable, which were retained and used for the final round of data collection. The analysis of the collected data revealed that there are relationships between the behavioral biases themselves. Based on such relationships, the biases were categorized and investor decision-making profiles were proposed.

show abstract