Behavioral Bias in Individual Investment Decisions: Is It a Common Phenomenon in Stock Markets?

Nawal Hussein Abbas Elhussein and Jarel Nabi Ahmed Abdelgadir

International Journal of Financial Research, 2020, vol. 11, issue 6, 25-36

Abstract: This paper aims to investigate the behavioral factors that influence individual investment decision making at a developing country stock market; the Sudanese Stock Exchange Market. The Study employs a cross-sectional survey design as well as analytical methods to collect the necessary data and establish the relationship between the study variables. Data is collected through a structured questionnaire from a sample of 203 individual investors and Correlation and Regression methods are used to conduct the analysis. The findings of the paper provide evidence that behavioral biases play a noticeable role in individual investment decision making process regardless of the degree of development of the stock market. The paper demonstrates that heuristic and market factors play a dominant role in the process of individual decision making in the Khartoum Stock Exchange. The factors that have a significant impact on individual investment decision making process include Representativeness, Overconfidence, Anchoring, Historical cost of stock, Customer preferences, Loss aversion, Mental accounting, Other investors¡¯ trading volume, and Quick reaction to changes in other investors ¡®decisions. Factors that have an insignificant impact include Availability bias, Change in stock prices, Regret aversion, and Other investors¡¯ decisions and choices.

Keywords: behavioral bias; herd behavior; heuristic bias; market factors; prospect theory (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:11:y:2020:i:6:p:25-36

DOI: 10.5430/ijfr.v11n6p25

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