INDIVIDUAL INVESTMENT DECISION MAKING PROCESS. BIASES AND REMEDIES

Adrian Mitroi
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Adrian Mitroi: BUCHAREST UNIVERSITY OF ECONOMIC STUDIES, ROMÂNIA, CFA ROMÂNIA, AAFBR ROMÂNIA

Annals - Economy Series, 2014, vol. 1, 245-252

Abstract: In the pursuit of understanding the behavior of the market player, the basic argument relays on the supposition that the risk appetite increases exactly at the worst moment - when the capacity to assume additional risk decreases significantly. People view a sample randomly drawn from a population as highly representative and cvasi similar to the population in all its essential characteristics. They expect any two samples drawn from a particular population to be more similar to one another and to the population than is statistically justifiable. This behavior is different from the tenets of classic finance theory. The article reviews some psychological concepts relevant and used in the study, in an interdisciplinary effort of understanding the correlation or causality between psychology and finance. The statistical interrogation describes the sampling methodology, the frequency of data and the empirical methodology that lead to analysis of the results and concluding remarks. The study provides details on raw statistical test scores, regression results and analysis. In this study, I evaluate the association between investors’ behavior and her portfolio results. The paper aims at demonstrating whether investor psychological biases lead to investment performance to tilt to the mean in the long run.

Keywords: Psychology; biases; efficiency; individual investment (search for similar items in EconPapers)
Date: 2014
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