Heuristic-driven biases as mental shortcuts in investment management activities: a qualitative study

Ahmad, Maqsood; Wu, Qiang

doi:10.1108/qrfm-10-2022-0167

Cited by 4 publications

(1 citation statement)

References 72 publications

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“…However, the world of investment is not solely guided by rational decision-making. Behavioral finance challenges the traditional notion of investors consistently acting rationally, suggesting that cognitive and psychological factors often lead to deviations from rationality (Ahmad & Wu, 2023;Crosby, 2023;Daxhammer et al, 2023;Gurung et al, 2023;La Porta et al, 2000;Quaicoe & Eleke-Aboagye;.…”

Section: Introductionmentioning

confidence: 99%

Assessing the Influence of Financial Literacy and Economic Independence on Investment Decisions

Khadka

2023

Nep. J. Multidisc. Res.

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This study examines the variables influencing individual investors' decisions to make investments in the fast-paced financial landscape of Nepal. Two main goals were investigated: first, the relationship between financial literacy, investment decisions, and economic independence was explored; second, the effects of these aspects were examined in detail. The results show a robust positive association between financial literacy and wise decision-making, as well as between investment decisions and economic independence. Its importance was highlighted when it was found that economic independence strongly predicted investment decisions. Furthermore, financial literacy was shown to be an essential aspect impacting investing preferences. These findings underscore the significance of financial education and empowerment for individual investors in Nepal. Prospective avenues for investigation comprise delving into cultural impacts, evaluating the effectiveness of financial literacy initiatives, and examining the effects of nascent FinTech platforms on investing choices. This research adds to our understanding of the dynamics of investments in Nepal's changing financial system and provides valuable information for policymakers and investors.

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Section: Introductionmentioning

confidence: 99%

Assessing the Influence of Financial Literacy and Economic Independence on Investment Decisions

Khadka

2023

Nep. J. Multidisc. Res.

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Biases and investment decision: an analysis of demographics using PLS-MGA

Raj

2025

IJAIM

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Purpose This study aims to evaluate how biases among retail investors – such as mental accounting, overconfidence and herd behaviour – affect their investment choices, while also examining how demographics, specifically, age, gender and income moderate these effects. Design/methodology/approach This paper uses quantitative method for collecting data through questionnaire from 385 Indian investors investing actively in stock market. The relationship was tested using partial least squares structural equation modelling through SmartPLS 4.0. To analyse the moderating role of demographics, multi-group analysis with percentile bootstrapping approach was performed. Findings The results reveal the varying effect of each bias on investment decision. The evidence proves the presence of herd behaviour, overconfidence and mental accounting while making investment decisions. Furthermore, age and gender was found to be moderating the effect of biases and investment decision of Indian investors. Also, the results imply that female investors are more prone to herd behaviour compared to their male counterparts. Research limitations/implications The study confirms that investors often deviate from complete rationality, with their investment decisions constrained by available resources, information and cognitive processing abilities, consistent with the theory of bounded rationality. The findings offer practical insights for financial advisors, educators, investors, government agencies and regulators to enhance investment decision-making practices. Originality/value This study offers new perspectives on the impact of behavioural biases on investment decisions. Particularly, the study enhances the understanding of investment patterns and contributes to the behavioural finance literature by addressing the interplay between demographics and investor behaviour in a rapidly growing economy.

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The role of financial knowledge in managing antecedents and repercussions of fundamental and technical anomalies: evidence from an emerging Asian economy

Ahmad,

Wu,

Abbass

et al. 2024

JAMR

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PurposeConventional theories of financial management are notably inconspicuous when considering the influence of heuristic-driven biases and fundamental and technical anomalies on institutional investors' investment decision-making performance and market efficiency, particularly, in emerging Asian economies. This study aims to explore the mechanism by which heuristic driven biases (i.e. cognitive heuristic biases and recognition-based heuristic biases) influence institutional investors' investment decision-making, investment performance and perceived market efficiency, with a mediating role of fundamental and technical anomalies and the moderating role of financial knowledge in Pakistan.Design/methodology/approachData were collected through a survey completed by 180 institutional investors trading on the Pakistan Stock Exchange. Structural equation modeling was used to analyze the data and test the hypotheses.FindingsThe results suggest that heuristic-driven biases have a significant negative influence on perceived market efficiency and investment performance and a significant positive effect on investment decisions of institutional investors. Fundamental and technical anomalies appeared to mediate these relationships. The results also revealed that financial knowledge moderates these relationships.Originality/valueThis study pioneers research on the links among heuristic-driven biases, financial knowledge, fundamental and technical anomalies and institutional investors' decisions and performance. This adds to the understanding of the role that heuristic-driven bias plays in investment management activities and enhances the appreciation of various behavioral aspects and their influence on investment decision-making and performance in an emerging market. It also contributes to the literature on behavioral finance, specifically the role of heuristics in investment strategies, which is still in its initial stage in developed countries, let alone in developing countries. The current research contributes to the literature by defining heuristic-driven biases as antecedents and fundamental and technical anomalies as intervening variables for irrational investment decision-making and poor investment performance. In addition, this study underlines the significance of utilizing financial knowledge to manage the antecedents and repercussions of fundamental and technical anomalies.

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Heuristic-driven biases as mental shortcuts in investment management activities: a qualitative study

Cited by 4 publications

References 72 publications

Assessing the Influence of Financial Literacy and Economic Independence on Investment Decisions

Assessing the Influence of Financial Literacy and Economic Independence on Investment Decisions

Biases and investment decision: an analysis of demographics using PLS-MGA

The role of financial knowledge in managing antecedents and repercussions of fundamental and technical anomalies: evidence from an emerging Asian economy

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