Developing a Behavioral Model of Individual Investors’ Decisionmaking in the Iranian Capital Market

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Nayebmohseni Sheida; Khalifehsultani Seyed Ahmad; HEJAZI REZVAN

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Journal Paper

Paper Information

Journal: FINANCIAL RESEARCH Year:2022 | Volume:23 | Issue:4 Page(s): 625-652

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Information Journal Paper

Title

Developing a Behavioral Model of Individual Investors’ Decisionmaking in the Iranian Capital Market

Author(s)

Nayebmohseni Sheida | Khalifehsultani Seyed Ahmad | HEJAZI REZVAN | Issue Writer Certificate

Keywords

Behavior biases

Multi grounded

Investor’s decision-making

Abstract

Objective: The human decision-making process is complex and influenced by various factors. Investors' emotional decisions cause stock prices to deviate from real ones, leading to incorrect stock pricing and consequently inefficient investment. In response to criticisms of traditional financial theories, behavioral finance seeks to explain the anomalies in financial markets by considering the fact that investors are not entirely rational and their behavioral biases influence their decisions. Due to the necessity of the subject and the lack of a comprehensive model that shows the factors influencing the decision-making of investors in the Iranian capital market, the present study developed this model. Methods: The multi-grounded theory method was used in the current study. In-depth semi-structured interviews with professional experts were arranged to collect data. The statistical population of the present study included individual investors active in the Iranian capital market. The process of conducting interviews, analyzing them, and presenting the model started in March 2019 and continued by the end of 2021. Finally, 67 main categories and 218 concepts were extracted from conducted interviews that formed the overall model of the research. Results: Causal factors which influence investors’ decision making include: regret aversion, greed, fear, cognitive dissonance, reputation, anchoring, self-attribution biases, loss aversion, gambling pleasure, investment thinking, herding behavior, endowment bias, representativeness biases, false excitement, overconfidence biases, hindsight bias, regency bias, mental accounting, illusion of control bias, trading asymmetry, similarity error, magnet effect, gambler's fallacy, motivation, time horizon, first profit effect, experience, age, gender, are analyzed. Conclusion: Based on the research results, individual investors can improve the quality of their decision-making and make more effective investment decisions by implementing the presented strategies, and also by identifying and reducing their mental biases. These strategies include self-analysis, note-taking, capital market knowledge, concentration, holistic, patience, acceptance, mistakes review, self-reliance, consulting, openness to criticism, flexibility, study, diversification, and distract.

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APA: Copy

Nayebmohseni, Sheida, Khalifehsultani, Seyed Ahmad, & HEJAZI, REZVAN. (2022). Developing a Behavioral Model of Individual Investors’ Decisionmaking in the Iranian Capital Market. FINANCIAL RESEARCH, 23(4 ), 625-652. SID. https://sid.ir/paper/958402/en

Vancouver: Copy

Nayebmohseni Sheida, Khalifehsultani Seyed Ahmad, HEJAZI REZVAN. Developing a Behavioral Model of Individual Investors’ Decisionmaking in the Iranian Capital Market. FINANCIAL RESEARCH[Internet]. 2022;23(4 ):625-652. Available from: https://sid.ir/paper/958402/en

IEEE: Copy

Sheida Nayebmohseni, Seyed Ahmad Khalifehsultani, and REZVAN HEJAZI, “Developing a Behavioral Model of Individual Investors’ Decisionmaking in the Iranian Capital Market,” FINANCIAL RESEARCH, vol. 23, no. 4 , pp. 625–652, 2022, [Online]. Available: https://sid.ir/paper/958402/en

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