Investigating the Demographic Characteristics of Institutional Investors Affecting Representativeness, Conservatism and Overconfidence Biases in their Individual Investments

Abstract

This study aims to identify the factors affecting representativeness, conservatism, and overconfidence biases in a sample of Turkish institutional investors. In difference to other studies, especially the individual investments of institutional investors in capital markets are focused on. The respondents who are selected with the method of convenience sampling are asked survey questions. In the study, models are formed with the stepwise method using linear regression analysis, and survey questions that are assumed to represent the examined biases are selected as the dependent variable. The age, gender, marital status, education, whether or not having children, and experience of institutional investors are included in the analysis as the independent variables. This way, which of the independent variables that are found to be statistically significant and the subcategories of these independent variables are most influential on the biases is revealed. As a result of the analysis, in addition to determining the variables that affect a single bias, it is understood that the variable of education level affects all examined biases, and especially the effect of low education levels on the examined biases is higher. In the regression analysis, experience is identified as a significant variable affecting representativeness and conservatism biases. It is observed that especially the institutional investors who are inexperienced or less experienced interact with these two biases more in their decisions related to their individual investments. Gender is found to be significant variable on both conservatism and representativeness biases, especially it was understood that female institutional investors were more effective than men on the representativeness and conservatism bias. Furthermore, it is determined that the marital status variable and the divorced institutional investors as a subcategory of this variable are significantly influential on conservatism and overconfidence biases.

Do investment fund managers behave rationally in the light of central bank communication? Survey evidence from Poland

“…We followed the practice from the psychological literature, which underpins the behavioural biases investigated in our paper, where the chi-squared test is commonly applied and which allows to verify the hypothesis about the existence of the relationship between two phenomena and not about the causal influence of one phenomenon on another phenomenon. Therefore, we formulated relations from R1 to R13 as statements (in the format “There is a relationship between […]”) rather than as causal (directional) relations (in the format “X has an impact on Y”), which is a common practice in this line literature [see Nicolas et al (2013), Zouhayer (2014) or Koc (2022)].…”

“…Therefore, we formulated relations from R1 to R13 as statements (in the format "There is a relationship between …") rather than as causal (directional) relations (in the format "X has an impact on Y"), which is a common practice in this line literature (see e.g. Nicolas et al (2013), Zouhayer, M. (2014) or Koc (2022)).…”

“….]") rather than as causal (directional) relations (in the format "X has an impact on Y"), which is a common practice in this line literature [see Nicolas et al (2013), Zouhayer (2014) or Koc (2022)].…”

A Literature Review on the Influence of Availability Bias and Overconfidence Bias on Investor Decisions

“…Overconfidence Bias has been the subject of many investor studies (Alp Coşkun et al, 2023;Alsabban & Alarfaj, 2020;Amalia Yunia Rahmawati, 2020;Isidore R & Christie, 2019;Koc, 2021;Lee et al, 2022;Madaan & Singh, 2019). Research findings suggest that overconfidence bias, at times, can result in impulsive and overly confident investment decisions.…”