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Factors influencing investor’s decision making in Pakistan: moderating the role of locus of control
Muhammad Haroon Rasheed, Amir Rafique, Tayyaba Zahid, Muhammad Waqar Akhtar,
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Muhammad Haroon Rasheed, Amir Rafique, Tayyaba Zahid, Muhammad Waqar Akhtar, "Factors influencing investor’s
decision making in Pakistan: moderating the role of locus of control", Review of Behavioral Finance, https://doi.org/10.1108/
RBF-05-2016-0028
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1. Introduction
The stock market is a place where the sale and purchase of stocks occur. For any economy, the
stock market acts as a source of financing the investments of business organizations (Samuel,
1996). Stock markets are also considered to be the yardsticks for the economic strength and
development of a country. Therefore, the movements of the stock market or the trend of the
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market represents the economic health of a country. A rise in share prices is said to be a positive
sign for an economy (Jaswani, 2008). Pakistan is an emerging economy and, according to
Bloomberg, the stock market in Pakistan is the best performing market in Asia in 2016 and the
fifth best performing market globally. The stock exchange in Pakistan has recently announced to
regain its emerging market status from the MSCI's All Country World Index (ACWI) (Faseeh
Mangi, 2016). Investors worldwide are looking for stock markets that are less affected by the
interest rate cycle in the U.S. and the economic slowdown in China. For them, Pakistan is an
outstanding place in which to invest (Faseeh Mangi, 2016), with investors across the globe
eyeing Pakistan for future ventures, it is of vital significance to study and understand the
behavior of investors operating in the Pakistan stock market and the factors influencing their
investment behavior.
According to conventional theories of finance, investors are perfectly rational and act as
wealth maximizers in financial decisions (Markowitz, 1952). However, when we observe the
decision making of investors in real life, we see that, in fact, investors do behave irrationally.
Behavioral finance, by using theories of psychology and finance, helps us to identify the reasons
The aim of any investor is to gain maximum benefit, and in order to achieve that, investors
analyze the capital market situation and have a vigilant eye on market determinants and
indicators.
Nonetheless, investors’ emotions, feelings, and intuition influence their decisions and can result
in irrational behavior (Kahneman and Tversky, 1979). The investor’s psyche also has a strong
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effect on investment decision making, which is why they can behave irrationally (Zaidi and
Tauni, 2012). Emotions and psyche are major factors that cause biases in investment decision
making. Biases are defined as predispositions towards error (Shefrin, 2007) and investors are
prone to a number of biases, errors, and illusions while making decisions due to lack of
capability in processing the complete information (Shefrin, 2009). Those errors and biases can
also be caused by investor’s use of some mental shortcuts, also known as heuristics (Slugoski et
al., 1993).
“A heuristic is a strategy that ignores part of the information with the goal of making
decision more quickly, frugally and/or accurately than more complex methods” (Gigerenzer and
Gaissmaier, 2011). Heuristic principles are rules of thumbs, or mental shortcuts, which help
investors to make a decision without doing a complex probability assessment and then predicting
values affiliated with a certain decision. These heuristics lead an investor towards severe and
systematic errors in their decisions (Tversky and Kahneman, 1974), hence causing them to
behave irrationally. In this study, our main focus is on the two most commonly used heuristics in
decision making, namely representativeness and the availability heuristic (Tversky and
Kahneman, 1974). Another reason for selecting these two heuristics for our research is that the
effects of these heuristics are not limited to the layman only, but also apply to experienced
investor (Tversky and Kahneman, 1974). It is not surprising that investors use these heuristics in
their decision making; what is, however, odd is that investors with knowledge and lifelong
experience in their field fail to utilize that knowledge and experience in application of
fundamental statistical principles for rational decision making and instead use these heuristics for
forming their decisions. Their mindset is such that they are not willing to accept rational analysis
In this study, we will also see the moderating effect of the locus of control on the relationships
between investment decision making and both representative and availability biases. It is human
nature to think that one’s own personal involvement may change the results but, in reality,
human memory is not reliable and the chance of error always exists (MacLeod and Daniels,
2000). Another factor is that people think that an outcome happens due to their own personal
effort and that is why they tend to rely on their own intuition (Coleman and DeLeire, 2000),
The purpose of the present study is to theoretically and empirically explore the effect of
representative and availability biases on investment decision making and to test the interaction
effect of the internal locus of control with the said relationships using data collected from
investors operating in the Pakistan stock market (PSX). Our research is a pioneering study in
2. Literature Review
This section comprises the theoretical background upon which the proposed model is based.
2.1 Investment Decision Making
Investment is the action or process of investing money with the hope of future benefit. Investing
through research and by keeping a clear mind can lead to success. Every investor wants to get
maximum return from their investment. Sharpe (1964) explained the maximum level of risk for a
specific level of return to compare decisions from a benchmark position. In the past few decades,
some research has indicated that optimal and rational decision making is dependent on
knowledge of finance; the more a person has knowledge of finance, the more rational a decision
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will he make (Merton, 1987). However, research over the past two decades has highlighted the
relates to having perceptions, memories, and thoughts without awareness, and has used this to
describe the reason why sane investors make errors in investment decisions (Hilton, 2001).
Investors thoughts and feelings can change the decision making process from rational to
According to conventional theories of finance, investors are perfectly rational, but in the
actual world, they are affected by many factors, including psychological and behavioral, that
hinder the process of rational decision making. Behavioral finance attempts to explore the
reasons for this by linking different aspects of human nature with financial models (Barber and
Odean,
1999), and some results indicate that, at times, investors do not display informational efficiency
(Ritter, 2003). Due to these factors, investors are not always rational and their decisions are
Representativeness can be explained as the degree of similarity that an event has with its parent
population (DeBondt and Thaler, 1995). This heuristic can be observed when a person is willing
to generalize about another person or phenomenon, including stocks, based on only a few
attributes
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(Bazerman and Moore, 2012; Nisbett and Ross, 1980). This is because investors use mental
shortcuts and rules of thumb to make investment decisions and may invest in a company only on
the basis of its characteristics, such as type of management, historical returns, or popularity, etc.
However, such pattern recognition can be weak due to the neglect of any supporting evidence.
Investors prone to representativeness may make biased decisions: for example, they may place
too much weight on recent experience and ignore the average long-term rate (Ritter, 2003).
Representativeness can also cause investors to wrongly infer the long-term growth rate of the
company by focusing on recent increases (Waweru et al., 2008). Representativeness also leads
investors towards irrational decisions by making them overreact, which occurs when investors
tries to buy “hot” stock instead of that which is poorly performing (DeBondt and Thaler, 1995).
Since the mid-20th century, with the emergence of behavioral finance, research has provided
ways to make investment decisions based on facts rather than probability. Ideally, investors
should calculate financial ratios to calculate future expected returns from the investment,
although they, in fact, consider the probability of a particular outcome using their previous
experience (Gold and Kraus, 1964), hence wrongly inferring that large firms with previous high
levels of returns will also generate high returns into the future (Jacobson, 1994). Complex
decision making in high uncertainty environments is often based on intuition, and the role of
intuition is crucial in most financial decisions (Kahneman and Riepe, 1998). However, decisions
based on intuition are often irrational and biased because they are not based on a complete
analysis of all of the available information but rather on gut feelings and heuristics (Simon,
1987).
Investors believe that their previous experiences and decisions were mostly correct, and on
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the basis of their prior experience they will make rational decisions in the future also (Rosman et
al. O’Neill, 1994), causing investors to become stuck in the same patterns of investment over and
over again, as a result of which they do not have a vigilant eye on the current scenario (Prechter
Jr, 2001). Rational investors know that a rigorous analysis is required before investment decision
making but nonetheless have a tendency to rely on past experience, which is alarming in
financial markets (Shimizu, 2007). Investors in the capital market do not act as they should,
which is to act rationally and without considering their previous experience (Filbeck et al., 2005).
Over the past few years, researchers have been trying to highlight some of the factors of
investors’ representativeness behavior and how this causes irrationally. Investors of the modern
era are greatly tempted by reputation and the celebrity effect of a firm (Pfarrer et al., 2010). A
commonly repeated phenomenon is that of looking backwards instead of looking forwards, but
investors fail to realize that future outcomes can vary from their past experiences (Arrfelt et al.,
2013) and also the reputation of firms in which investors are going to invest sometime leads
investors to make decisions on the basis of the prior performance of the firm (Petkova et al.,
2014). All of these phenomena are caused by representativeness and often lead investors to select
H1: Representative bias is significantly and positively associated with the degree of
Availability bias is a bias in which the decision maker relies on knowledge that is readily
available rather than examining other alternatives and procedures. That is why it causes decisions
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to be irrational (Folkes, 1988). It can be observed in investors when they prefer to invest in local
companies with which the investor is more familiar or where information about them can be
easily obtained (Waweru et al., 2008). Decision makers in the capital market are also influenced
by the information and they give more weight to people-oriented information (Haley and Stumpf,
1989).
Another effect of availability bias is that it can cause an investor to wrongly believe that a stock
perceived to have a good return will have a low risk and that securities perceived as bad will be
judged to be of high risk and low return (Ganzach, 2000), leading to suboptimal decisions.
From the later 20th century onwards, researchers have investigated important factors that
may cause availability bias, due to which, based only on partial information, investors change
their investment decisions. Information such as a change of executives and management of firms,
or the appointment of new CEO of the company, can cause their investment decisions to change
(Lubatkin et al., 1989). Investors sometimes make decisions without taking into consideration the
correct and relevant information (Scharfstein and Stein, 1990). Furthermore, in the case of
financial crises, investors have to suffer more than the market due to their reactions based on
availability bias (Marcus and Goodman, 1991). This is because investors overreact in a negative
manner when they hear announcements about securities and layoffs (Worrell et al., 1991),
Investors are found to choose only those stocks that have recently caught their attention
from the news or those trading abnormally or offering extreme returns (Barber and Odean,
2008). Sometime investors’ decisions change through keen observation of just the actions and
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news leaked by representatives of the stock exchange (Stearns and Mizruchi, 1993), resulting in
Information about stock exchange gains/losses and the macro economy influence the
decisions of investors (Bulmash, 2001).The way in which information is reported in the financial
market and the role of intermediaries also play vital roles in altering investment decisions and
have a great influence on investors’ mindset (Healy and Palepu, 2001). Investors’ preferences
change according to the available information (Harris and Raviv, 2005), leading to a particular
pattern of investment, and sometimes even irrelevant information also influences investment
decisions (Kirchler et al., 2005). On the basis of recently available information, the risk taking
behavior of investors about particular security also changes (Grable et al., 2004), as do their
decisions.
Investors compare the performance of a given firm with the performance of a peer, and
they react based on the information about the performance of securities (Brauer and Wiersema,
2012). This information can change the portfolio selection of investors towards liabilities instead
of assets that are beneficial for the investor (Wang et al., 2014), as instead of accessing and
evaluating all the information, investors use only the most recent or available information.
(Bowers et al., 2014) and instead of making rational judgments, they depend on shortcuts like the
availability heuristic that will lead towards irrational decisions. Hence it is proposed that:
H2: Availability bias is significantly and positively associated with the degree of
When a person believes that the desired outcome occurs due to his/her own abilities, this is called
the internal locus of control. In contrast, if a person thinks the positive result is due to external
factors, such as luck, chance, fate and, powerful others, than this is called an external locus of
control (Selart, 2005). In our study, we incorporated the internal locus of control as a moderator.
A variable acting as a moderator is said to be one that can alter the form or strength of the
relationship between the predictor and criterion variable (Sharma et al., 1981). As per the rules
set by Baron and Kenny (1986) for moderation, we will analyze the effect of the interaction term
on the relation between heuristics biases and decision making. The role of the locus of control in
investment decision making relates to the extent to which the locus of control impacts on
Investors will be greatly motivated towards certain decisions if they think the situation is in
their own control. The locus of control is an important behavioral factor and is incorporated in
studies of the factors influencing ethical decision making (Özbek et al., 2013) and in consumers’
investment is also a purchase decision, but of capital assets ( Kazemi et al., 2015); however, there
has been no significant research in the field of Investment decision making. Hence, there is a
need to explore its effect in the field of finance as it can provide a significant understanding of
the differences in the behavior of investors. Modern researchers have found that the locus of
control provides a strong explanation for future outcomes (Hiller and Hambrick, 2005) and can
explain difference in investors’ behavior as there are differences in the level of the locus of
control among investors of collectivist and individualist societies (Spector et al., 2002). An
investor’s interpretation of their personal abilities to control the outcome is also affected by the
nature of the investment and the time horizon (Lam and Schaubroeck, 2000). The effect of the
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locus of control is not limited to individual investors only: decision makers at the executive level,
such as managers and executives, also indulge in this phenomenon of believing that the outcomes
Some investors do not know their abilities (Gervais and Odean, 2001) and become overly
risk averse, whereas some investors overestimate their abilities and believe that they can control
or change market conditions (Allen and Evans, 2005). Such investors believe they are better than
average (Kaustia and Perttula, 2012), which will lead them to an increased degree of irrationality
Investors with an internal locus of control do not perform well as they do not consider helpful
information in making their decisions (Boone and Van Witteloostuijn, 2005). An Investor will be
said to have an internal locus of control if they attribute the cause and control of an investment
outcome to be within their power, and this certainty about controlling the outcome will lead an
investor to act upon their intuition or gut feeling instead of relying on rational analysis. Investors
with an internal locus of control will consider their decision outcomes to be within their control
(Selart, 2005) and will be more self-centered towards their decision making; hence, an absence of
willingness in investors to accept their errors of judgement will lead such investors to biased and
irrational decision making (Davis and Bobko, 1986). Based on the discussion above, it can be
inferred that the greater the degree of internal locus of control an investor has, the more he will
rely on decisions based on heuristics; hence, the present study is of the view that the presence of
an internal locus of control will lead investors towards more biased and irrational investment
H3: Internal locus of control moderates the relationship between representative bias and
H4: Internal locus of control moderates the relationship between availability bias and
In this study, a framework is proposed as shown in figure 1 to explore the factors influencing
investment decision making. First, this study examines the relative explanatory power of
availability bias and representative bias for the degree of irrationality in financial decision
making, and second, it will examine the interaction effect of the locus of control.
The questionnaire consists of two parts. The first part comprises descriptive questions, including
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gender, marital status, age, and investment experience. The second part consists of adapted
measures to identify availability and representative heuristics along with the locus of control and
decision making method. In this part, a 5-point Likert scale is used, which is the most widely
used scale. Given below are the details of the items used in the instrument.
3.1.1 Availability Heuristics. This measure consists of five items, the first two of which
are adopted from a 10-item scale to measure heuristics and biases by Kudryavtsev et al. (2013).
The third and fourth items of the measure are from Luong and Thu Ha (2011), whereas the fifth
3.1.2 Representative Heuristics. This measure consist of six items, of which the first three
questions identify the degree of representativeness in investors using a 27-item instrument from
Sarwar et al. (2014). The fourth and fifth items are from Waweru et al. (2008), whereas the last
item for measuring the representative heuristic in investors is from Luong and Thu Ha (2011).
3.1.3 Locus of Control. The items to measure the internal locus of control in investors are
adapted from an instrument developed by Furnham (1986). For our research, we have adapted
and Bruce (1995), from which we only incorporated intuitiveness in our questionnaire as a proxy
3.2 Sample
In our study, we distributed 300 hundred questionnaires among the investors. This sample size is
large enough to fulfil all the statistical requirements and this was also confirmed by reviewing
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various studies conducted on similar topics in different environments, such as those of Waweru
et al. (2008), Kudryavtsev et al. (2013) and several others, in which the sample size ranged from
170 to 230.
The convenience sampling technique was used to select the respondents, as it can give the
highest rate of response. It also saves time and resources (Bryman and Bell, 2015), and in the
given circumstances and constraints of our research, this method is best suited due to the
unknown population. The sample was selected by identifying brokers at the stock market and,
after gaining their consent, approaching their clients to complete the questionnaires.
The survey was conducted among investors operating in the cities of Islamabad, Lahore,
and Sargodha. The questionnaires were distributed among the investors at different brokerage
offices in these cities. Of the 300 questionnaires distributed, 271 were returned, of which 227
were considered for the final analysis; the remaining 44 were discarded due to missing values
and unclear or dual selection among the given options. The demographic distribution of the
Marital Status
Married 111 48.9
Single
116 51.1
Gender Male
201 88.5
Female 26 11.5
Age
18 to 25 24 10.6
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26 to 33 85 37.4
34 to 41 60 26.4
42 to 49 42 18.5
50 & Above 16 7.0
Qualification
Intermediate 7 3.1
Bachelors 96 42.3
Masters 110 48.5
M.Phil. 7 3.1
Others 7 3.1
To ensure the content-related validity of the items, as per the context of our study of the adapted
instrument compiled, our method has been reviewed and tested by a two academic experts. To
ensure that the language of the questionnaire was clear for the investors, the instrument was
reviewed by a broker, an investment banker, and an expert in English language, together with a
three investors. Their opinions and suggestions were incorporated as far as possible without
affecting the nature of the questions, after the review by the academic experts. To examine the
construct validity, explanatory and confirmatory factor analyses were used. The convergent and
discriminant validity of the instrument were ensured, pursuant to the criteria of Campbell and
Fiske (1998), by using confirmatory factors analysis. The results of the analysis showed that all
the correlations are greater than zero and may be considered convergent valid. According to
Campbell and Fiske (1998), discriminant validity is established by counting the number of times
an item correlates higher with items from other factors than with items from its own factor,
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which should be above 50 percent; this was also fulfilled, showing our instrument to be both
A pilot study was also conducted to analyze reliability, using data from 30 investors. The
reliability was assessed using Cronbach’s alpha. All of the values were well above 0.70, enabling
us to conclude that the instrument is fit for further analysis. Cronbach’s alpha is a measure of
internal consistency (Nunnally et al., 1967) and its value should be greater than 0.70, which in
our case was also achieved for the overall sample, as shown in Table II below. The criterion
validity of the instrument used is also considered satisfactory as the item to total correlation is
removing any questionnaires with missing values. The structural equation modeling technique
was used for testing the proposed relationship: this is a multivariate statistical technique for
testing structural theory (Tan, 2001), incorporating both observed and latent variables.
The data were gathered using convenience sampling, a type of non-probability sampling that
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causes the data to be non-normal, which is confirmed through the test of normality in SPSS.
Spearman’s correlation analysis was conducted to analyze the direction and strength of the
relations among the variables, the results of which are reported in Table III.
employed structural equation modeling (SEM), which uses the maximum likelihood method to
estimate the regression weights of the independent variables on the dependent variable. The
The findings shown in Figure 2 demonstrate that there is a positive relationship between
representative bias and decision making and also between availability bias and the decision
making of investors.
Table IV shows that the effect of availability bias on investors irrational or intuitive
decision making is significant, such that a one-unit increase in the level of availability bias will
result in an increase in irrationality of β=0.767 (p<0.01). This means that the more an investor
has availability bias, the more irrational they are in decision making, hence proving Hypothesis
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2.
The relationship between representative bias and irrational decision making is also
significant and has a positive effect: as can be observed in the table IV, a one-unit increase in the
level of representative bias will lead to an increase of irrationality of β=0.253 (p<0.05), hence
Goodness of fit of the SEM was verified using different finesses as calculated by AMOS. The
goodness of fit index (GFI) = 0.926 and the comparative fit index (CFI) = 0.920, of a maximum
value of 1 for the indices: the values should be as close to 1 as possible, and values above 0.90
are considered as good, while those above 0.80 are acceptable (Tsai and Ghoshal, 1998), The
value of CMIN/DF=1.491: this is a ratio of the chi-square and degrees of freedom, which should
be below
2 and is also acceptable at a value below 3 (Koufaris and Hampton-Sosa, 2002). The value of the
root mean square of the error of approximation (RMSEA) value is also below 0.5; hence, all the
the rules set out by Baron and Kenny (1986), two new variables were created in the data set, first,
by taking the product of the availability bias and the locus of control (A.BxLOC) and, second, by
multiplying the representative bias with the locus of control (R.BxLOC). These newly created
4.3.1 Moderation of Locus of Control with Availability Bias. The Table V below show
moderation regression results that the effects of availability bias (β=-0.078, p=0.900) and locus
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of control (β=0.171, p=0.793) are insignificant. The interaction term of these variables is also
insignificant (β=0.091, p=0.543), negating any moderating relationship of the locus of control
It can also be seen that, in Model 2, there is no significant change in the R square value, which
show moderation regression results that the representative bias (β=-0.480, p=0.383) and locus of
control (β=-0.185, p=0.711) are not significantly associated with investors’ decision making. The
interaction term of both variables is also insignificant (β=0.118, p=0.363), showing that the
relationship between representative bias and decision making is not being moderated by the locus
of control; hence, Hypothesis 4 is rejected. The value of the change in R square is also very low.
The summary of testing the hypotheses of the study is given in Table VII. There was a
significant relationship found between decision making and both availability bias and
representative bias. These results are in line with the studies of Waweru et al. (2008) and Bashir
et al. (2013). These results also affirm that investors in Pakistan are also affected by different
behavioral factors; hence, study of these factors can provide great insight into understanding the
easily available information and that they rely on information from friends and family without
any verification
Investors also use similar or stereotyped information in making their investment decisions and
they prefer to buy local stocks. Investors in Pakistan, also due to the effects of these heuristics,
wrongly believe that stocks of good companies will lead to a higher return. These two heuristics
lead investors to fail to diversify their portfolios. It is recommended for investors to evaluate the
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degree of bias they themselves have and then to make financial decisions by keeping that in
mind. They should, after investigating the information from the market, dually verify the facts
and figures.
moderation of locus of control could be that the traits of the sample used in each study, such as
personal characteristics, vary from culture to culture. In prior studies, investors in the Asia region
have been found to be more overconfident as compared to western investors (Chuang et al.,
2010;
Another possible explanation for these results could be that the relationship between
heuristic biases, including availability bias and representative bias, and investment decision
making is not personality specific (Lin and Ding, 2003), as in a bias caused by heuristics,
investors rely on the mental shortcuts developed through knowledge and experience (Gigerenzer
The main focus of this study was the effects of availability and representative bias on investment
decision making, which are caused by the reliance of investors on their heuristics (Tversky and
Kahneman, 1974). These heuristics cause decisions to be irrational or suboptimal, even though
investors have basic knowledge of standard finance and know the reward value associated with
rational decisions. Still, as discussed earlier, the effects of these biases are not limited to the
layman only but also apply to experienced and highly educated investors. These two heuristics
are the most commonly used in decision making, but their use leads to errors in prediction and
The results suggest that investors at the Pakistan stock exchange (PSX) are influenced by
both representativeness and availability bias. The investors prefer to buy only those stocks for
which more information is available to them instead of doing a complete analysis of all the
available and relevant information, and they invest in stocks only on the basis of the similarity of
their characteristics with their expected performance. Investors also depend for their decisions on
readily available information that can sometimes lead to poor market performance, especially
when investors are misled by false information. Hence, this study provides an explanation for the
behaviors of investors that cause stock markets to deviate from stock market efficiency.
The purpose of this study was not to prove that the theories of standard finance are
outdated but rather to better understand the actual, real life behavior of investors and to link this
behavior to that expected by theories of standard finance, aiming to provide a better explanation
for deviations from standard and rational behavior through empirical evidence.
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5.1 Implications
This study explains and affirms the reasons for the deviation of the stock market from standard
rational behavior as explained by existing financial models, endorsing Shefrin's claim (2007) that
investors are influenced by biases that cause them to deviate from rational behavior. This study
can help to explain the various phenomena that traditional finance has failed to explain, such as
overpricing, underpricing, herding behavior, focus only on popular stocks, and many others,
hence giving a much deeper understanding of the investors’ real life behavior.
This study will also help investors, including investment managers, to better understand
their own behavior by keeping in view the factors causing their decisions to deviate from wealth
maximizing decisions. It will help them to consider and analyze all the available information
much more effectively before making an investment decision. According to Nikiforow (2010),
providing training and awareness on behavioral factors will result in significant improvement in
This research also has implications for investment organizations seeking to analyze and
understand market trends in a more rigorous way and provides more reliable consultancy
information based on real life behavior to such investors. This study will also help policy makers
to better understand investors and devise policies that keep in view these psychological factors in
order to ensure the smooth running of the market. According to Spindler (2011), investor
protection is a prime concern for policy makers, along with stronger regulation, after the global
financial crisis. Prior to which policymakers considered investors to be rational, but the global
financial crisis posed some serious questions regarding this approach and revealed a strong need
5.2 Limitations
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The main limitation of this study is that it is limited to the effects of just two, albeit the most
commonly used, heuristics on decision making. There is a need to enhance the scope of this
research by incorporating all relevant heuristics in the model. The representation of female
investors is also very low. Only 26 out of 227 of the respondents were females; hence, it is
suggested for future research to have a more representative and adequate representation of
women, as Gumus and Dayioglu (2015) concluded that demography affects investors.
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APPENDIX:
QUESTIONNAIRE
Section 1:
Section 2.
Listed next are series of statements that represent possible ways individual might behave while
investing in the stock market along with some statements stating the way you feel about yourself.
With respect to your own behavior please indicate the level of agreement or disagreement with
the statements by mentioning 1 of 5 levels of agreement indicated below.
Strongly Slightly Neutral Slightly Agree Strongly Agree
Disagree Disagree
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1 2 3 4 5
Availability Bias:
A.B1 I prefer to sell stocks on the days when the value of the stock 1 2 3 4 5
market index decreases.
A.B2 I prefer to buy stocks on the days when the value of the stock 1 2 3 4 5
market index increases.
Locus of Control:
L.C1 Careful investing is the key factor to becoming rich. 1 2 3 4 5
L.C2 People’s suffer investment losses due to their own idleness 1 2 3 4 5
L.C3 Whether or not I have desired returns from my investment 1 2 3 4 5
depends upon my abilities.
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L.C4 In the long run, people who take care of their investments stay 1 2 3 4 5
wealthy.
L.C5 When I make my investment plans, I am almost certain to make 1 2 3 4 5
them work.
L.C6 I can pretty much determine what will happen in my investments. 1 2 3 4 5
L.C7 I am usually able to protect my investment interests. 1 2 3 4 5
L.C8 When I get what I want, it is usually because I worked hard for it. 1 2 3 4 5
Decision Making
D.M1 When making an investment, I trust my inner feelings and 1 2 3 4 5
reactions
D.M2 I generally make investments that feel right to me 1 2 3 4 5
D.M3 When making investments, I rely upon my instincts 1 2 3 4 5
D.M4 When I make an investment, it is more important for me to feel 1 2 3 4 5
the investment is right than have a rational reason for it.
D.M5 When I make Investment, I tend to rely on my intuition 1 2 3 4 5