AN EXPLORATORY APPROACH TOWARD IDENTIFYING BEHAVIORAL BIASES ON INDIVIDUAL INVESTORS

Abstract

The efforts to identify behavioral biases displayed by individual investors still continue. In addition to it, detecting these biases has also importance in behavioural finance domain. Through individuals' statements, produced from a previous in-depth interview study, this paper aims to explore whether those statements represent the denominated behavioral biases (i.e., preference for certainty, confirmation bias, consultancy bias, overconfidence bias, regret avoidance, loss aversion) as they are supposed to be and to observe whether those biases are related to individuals' risky investment behavior. We conducted exploratory factor and correlation analysis through the data of 107 individuals. Factor analysis results indicated that those statements represented their respective behavioral biases well. Correlation analysis showed that preference for certainty and loss aversion had a negative association with risky investment behavior, enabling that the relation between these two biases and risky investment behavior makes sense as expected. Managerial implications and research limitations were also discussed. (C) 2017 Published by Future Academy www. FutureAcademy.org.UK