Association between behavioural biases and investment decision-making: a meta-analysis

Making sound investment decisions is not easy, and the field of behavioural finance warns of behavioural biases to avoid. While studies examining the relationships between behavioural biases and investment decision-making are aplenty, efforts to consolidate and analyse them collectively are sca...

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Main Authors: Lim, Swee Hoe, Oo, May Myat Mon
Other Authors: Ho Moon-Ho Ringo
Format: Final Year Project
Language:English
Published: Nanyang Technological University 2022
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Online Access:https://hdl.handle.net/10356/162937
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Institution: Nanyang Technological University
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spelling sg-ntu-dr.10356-1629372023-03-05T15:44:37Z Association between behavioural biases and investment decision-making: a meta-analysis Lim, Swee Hoe Oo, May Myat Mon Ho Moon-Ho Ringo School of Social Sciences HOmh@ntu.edu.sg Social sciences::Psychology::Applied psychology Business::Finance::Investments Making sound investment decisions is not easy, and the field of behavioural finance warns of behavioural biases to avoid. While studies examining the relationships between behavioural biases and investment decision-making are aplenty, efforts to consolidate and analyse them collectively are scarce. Therefore, this meta-analysis aims to investigate the relationship between seven of the most prominent behavioural biases – as identified by past literature – present among individual investors and two aspects of investment decision-making, intuitive and rational. These seven biases were identified as overconfidence, herding, representativeness, availability, anchoring and adjustment, disposition effect and loss aversion. In total, 86 effect sizes from 36 studies comprising 7,615 participants from eight countries were analysed in a correlational meta-analysis. The findings show that overconfidence, representativeness, availability, and anchoring and adjustment biases were significantly and positively associated with the intuitive aspect of investment decision-making while loss aversion and disposition effects were significantly and positively associated with the rational aspect of investment decision-making. Herding was found to be not associated with both aspects of investment decision-making. Among the seven moderators examined, only age significantly moderated the relationship between availability bias and the intuitive aspect of investment decision-making, and the relationship between loss aversion bias and the rational aspect of investment decision-making. Gender, investing experience, education, continental difference, sampling technique and publication status did not display any significant moderation effects. The limitations of the present study as well as the implications for future research and practice are also discussed. Bachelor of Social Sciences in Psychology 2022-11-14T06:09:05Z 2022-11-14T06:09:05Z 2022 Final Year Project (FYP) Lim, S. H. & Oo, M. M. M. (2022). Association between behavioural biases and investment decision-making: a meta-analysis. Final Year Project (FYP), Nanyang Technological University, Singapore. https://hdl.handle.net/10356/162937 https://hdl.handle.net/10356/162937 en application/pdf Nanyang Technological University
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic Social sciences::Psychology::Applied psychology
Business::Finance::Investments
spellingShingle Social sciences::Psychology::Applied psychology
Business::Finance::Investments
Lim, Swee Hoe
Oo, May Myat Mon
Association between behavioural biases and investment decision-making: a meta-analysis
description Making sound investment decisions is not easy, and the field of behavioural finance warns of behavioural biases to avoid. While studies examining the relationships between behavioural biases and investment decision-making are aplenty, efforts to consolidate and analyse them collectively are scarce. Therefore, this meta-analysis aims to investigate the relationship between seven of the most prominent behavioural biases – as identified by past literature – present among individual investors and two aspects of investment decision-making, intuitive and rational. These seven biases were identified as overconfidence, herding, representativeness, availability, anchoring and adjustment, disposition effect and loss aversion. In total, 86 effect sizes from 36 studies comprising 7,615 participants from eight countries were analysed in a correlational meta-analysis. The findings show that overconfidence, representativeness, availability, and anchoring and adjustment biases were significantly and positively associated with the intuitive aspect of investment decision-making while loss aversion and disposition effects were significantly and positively associated with the rational aspect of investment decision-making. Herding was found to be not associated with both aspects of investment decision-making. Among the seven moderators examined, only age significantly moderated the relationship between availability bias and the intuitive aspect of investment decision-making, and the relationship between loss aversion bias and the rational aspect of investment decision-making. Gender, investing experience, education, continental difference, sampling technique and publication status did not display any significant moderation effects. The limitations of the present study as well as the implications for future research and practice are also discussed.
author2 Ho Moon-Ho Ringo
author_facet Ho Moon-Ho Ringo
Lim, Swee Hoe
Oo, May Myat Mon
format Final Year Project
author Lim, Swee Hoe
Oo, May Myat Mon
author_sort Lim, Swee Hoe
title Association between behavioural biases and investment decision-making: a meta-analysis
title_short Association between behavioural biases and investment decision-making: a meta-analysis
title_full Association between behavioural biases and investment decision-making: a meta-analysis
title_fullStr Association between behavioural biases and investment decision-making: a meta-analysis
title_full_unstemmed Association between behavioural biases and investment decision-making: a meta-analysis
title_sort association between behavioural biases and investment decision-making: a meta-analysis
publisher Nanyang Technological University
publishDate 2022
url https://hdl.handle.net/10356/162937
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