INVESTOR BASED PSYCHOLOGICAL DECISION MAKING MODEL

Mohd Alnajjar ()
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Mohd Alnajjar: Business Administration Department, Al-Faisal University, Prince Sultan College for Tourism & Business – KSA

Far East Journal of Psychology and Business, 2013, vol. 11 No 3 Paper 4 June, issue 4, 47-56

Abstract: Significance of behavioral finance has been realized. Intrinsic value of behavioral finance is to investigate the irrational attitude of investor while making investment decision. This study explores the investor based psychological decision making model for enhancing the understanding about the psychological decision making process of investors in Islamabad Stock Exchange. A self-administered structured questionnaire is used for gathering data from 168 respondents (investors of ISE). Correlational stats are applied for determining the relationship between the hypothesized variables of this study. Results show astonishing findings and confirm the irrational behavior of investor while investing in stock market. First astounding outcome is, information asymmetry is negatively associated with risk perception. Second surprising outcome is the reliance of investor risk associated with investment on the government policies. Third amazing result is contrary to the traditional finance theory which shows the positive association between risk perception and return expectations.

Keywords: Risk Propensity; Risk Perception; Return Expectations; Behavioral Finance (search for similar items in EconPapers)
JEL-codes: M1 (search for similar items in EconPapers)
Date: 2013
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