A Model for Explaining Investors' Financial Behaviors Based in Environmental Activities Based on Perceptions of Stock Portfolio Returns and Psychological Mechanisms in Tehran Stock Exchange

Document Type : Research Paper

Authors

• amirmasoud jahani ¹
• Mohammad Reza Shourvarzi ²
• Abolghasem Masih Abadi ³
• Alireza Mehrazin ⁴

¹ Ph.D Student in Accounting,Department of Accounting, Neyshabur Branch , Islamic Azad University, Neyshabur , Iran

² Iran Associate Professor ,Department of Accounting, Neyshabur Branch , Islamic Azad University, Neyshabur , Iran (Corresponding Author)

³ Assistant Professor ,Department of Accounting, Sabzevar Branch , Islamic Azad University, Sabzevar , Iran

⁴ Assistant Professor ,Department of Accounting, Neyshabur Branch , Islamic Azad University, Neyshabur , Iran

10.30495/jae.2022.4535

Abstract

Behavioral finance refers to how people make decisions under uncertainty conditions. The purpose of this study is to present a model for explaining financial behaviors of investors in Tehran Stock Exchange in the form of identifying influential behavioral factors and validating behavioral model. Data from the interviews are analyzed using content analysis method, resulting in the identification of 22 components grouped under 6 categories, according to which the questionnaire is designed. At this stage, the survey strategy is conducted, and then 300 questionnaires are distributed as available sampling method and 287 completed questionnaires are collected. Validity and reliability indicators show the high credit of the questionnaire. The results of this study indicate that cognitive biases are former than emotional biases, which besides the cultural influences and personality form investor’s decision making that lead to herding behavior. Results derived from questionnaires have been analyzed using descriptive and deductive statistics method (Structural Equation Modeling) and SPSS and AMOS software. Results from the study show that all behavioral biases directly and significantly influence the decision making of investors.

Keywords

• Behavioral biases
• Investors
• Behavioral finance
• Psychological mechanisms
• Momentum

---

References

- Abbaszadeh, Mohammad Reza, Rastegar Moghaddam Etemadi, Ali, Beigi, Behzad, (2014), Investigate the impact of managerial overconfidence on dividend policy in the companies listed on Tehran Stock Exchange, International Accounting Conference, 2 Economics and Financial Management: 10-26.

- Akhgar, Mohammad Omid, Gravandi, Bijan (2016) A new approach in capital market decision making, The Third International Conference on Management and Accounting in Iran.

- Bayat, Morteza, Nowruzi, Mohammad, Mirasharfi, Zahra, Pourmousavi, Ali Akbar (2016). The effect of management behavioral factors on investment efficiency and firm value. Empirical Accounting Research, Year 9, No. 35, pp. 53-76.

-Chandra, Abhijeet and Kumar, Ravinder. (2011) “Determinants of individual investor behaviour: An orthogonal linear transformation approach”. Jamia Millia Islamia (Central University), New Delhi

-De Bondt, W.P.M. (1993), “Betting on trends: intuitive forecasts of financial risk and return”, International Journal of Forecasting, Vol. 9 No. 3, pp. 355-371.

- Eslami Bidgoli, Gholam Reza, Sara Shahryari, “studying and herding test of investors by using returns deviations, stock from all of total return in Tehran stock exchange during 2001-2005”, Accounting and Audit Investigation, Fall 2007, issue 49.

-He, Ying & Chen, Cindy & Hu, Yue, (2019) "Managerial overconfidence, internal financing, and investment efficiency: Evidence from China," Research in International Business and Finance, Elsevier, vol. 47(C), pages 501-510.

-Hoffmann, A.O.I. and Post, T. (2015), “How return and risk experiences shape investor beliefs and preferences”, Accounting and Finance, available at: DOI: 10.1111/acfi.12169.

-Kahnemann D, A Tversky (1979). "Prospect theory: An analysis of decision under risk",Econometric a, Vol. 47: 263-291.

-Kahneman, A. and Tversky, D. (1974), “Judgment under uncertainty: heuristics and biases”, Science, Vol. 185 No. 4157, pp. 1124-1131

-Kahneman, D. and Lovallo, D. (1993), “Timid choices and bold forecasts: a cognitive perspective on risk taking”, Management Science, Vol. 39 No. 1, pp. 17-31.

-Khan, Mohammad Tariqul Islam & Tan, Siow-Hooi & Chong, Lee-Lee, 2017. "How past perceived portfolio returns affect financial behaviors-The underlying psychological mechanism," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1478-1488.

-Merilkas, A. and Prasad, d.(2003). Factor influencing Greek investor behavior on the Athens stock Exchange. Paper presented at the Annual meeting of Academy of Financial Services , Colorado, October 8-9-2003.

-Nelson, M., Evelyne, M. and Enrico, U. (2008). The effects of behavioural factors in investment decision-making: A survey of institutional investors. International Journal of Business and Emerging Markets, Vol. 1, No. 1, 2008, pp 24-41

-Odean, T. (1998).Are Investors Reluctant to Realize Their Losses? The Journal of Finance, 53(5),1775-1798.

- Rahnamaye Roodposhti, Fereydoon, Nategh Golestan, Ahmad, Yaghoubnejad, Ahmad (2015). Present a mental model of risk perception of investors in Tehran Stock Exchange, Investment Knowledge Quarterly, Fourth Year, Issue 13.

- Rahnamaye Roodposhti, Fereydoon, and Vahid Zandieh (2012). Behavioral Finance and Neurological Finance ", Jangal Publications, Tehran.

- Rahnamaye Roodposhti, Fereydoon (2012) Behavioral management accounting (Innovation, Value creation and entrepreneurship approach). Islamic Azad University Publications . Printing and Publishing Organization.

-Weber, B., Jermann, F., Gex-Fabry, M., Nallet, A., Bondolfi, G., & Aubry, J. M. (2010). Mindfulness-based cognitive therapy for bipolar disorder: A feasibility trial. European Psychiatry, 3, 1-4.

-Weber, M.E.U., Weber, M. and Nosic, A. (2010), “Who takes risks when and why: determinants of changes in investor risk taking”.