Behavioural portfolio formation using mental accounting in emerging markets: the case of Saudi Arabia

Musa Essayyad and Khalid Desai

International Journal of Monetary Economics and Finance, 2008, vol. 1, issue 3, 263-283

Abstract: This paper aims to test whether investors in Saudi Arabia build their portfolios in a layer-by-layer form, considering them as a pyramid of assets as described by Shefrin and Statman (2000), and to investigate whether investors diversify their investments based on their aspirations. We use t-test and regression analysis to test the nine hypotheses related to investors' portfolio-building behaviour. The results show that Saudi investors are influenced by the mental accounting bias and build their portfolios as a pyramid of assets. The results also show that Saudi investors diversify their portfolio investments based on their aspirations and not efficiency.

Keywords: assets pyramiding; behavioural finance; behavioural portfolio formation; emerging markets; portfolio investment; mental accounting; modern portfolio theory; portfolio diversification; Saudi Arabia investments; Saudi mutual funds. (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmefi:v:1:y:2008:i:3:p:263-283

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