An Empirical Study of Individuals’ Investment Decision Anomalies and HeuristicsBatuhan Medetoğlu, Arif Saldanlı
Behavioral finance argues that individuals are not rational while making investment decisions due to some psychological, exogenous, and other factors. As a result, they end up making poor financial decisions. This study was conducted to determine factors that individual investors are exposed to while making investment decisions. A questionnaire was handed over to 532 participants as part of the study. The Statistical Package for the Social Sciences (SPSS) program was used to conduct the analysis. Questionnaire responses were first subjected to factor analysis, and later, reliability analysis was conducted to determine which factors were the most effective in participants’ investment decisions. The reliability levels of the factors in the study were observed to be above the determined limits. The factors were shown to exhibit a significant and positive relationship. According to the results obtained, factors that affect investor decisions were grouped into three categories, namely, exogenous factors and herd behavior; cognitive illusions; and demographic and socioeconomic factors. Exogenous factors and herd behavior demonstrate situations that occur independently of investors, cognitive illusions demonstrate how psychological factors affect investors, and demographic and socioeconomic factors demonstrate how characteristics influence investors’ attitudes. Consequently, situations that affect investment decisions of investors were also grouped under three factors and findings concerning investor behaviors were explained. It was determined that the factors obtained in the study reflect and explain the situations that individuals are exposed to while making investment decisions. A majority of the participants are in the same age range, which is one of the study’s limitations. The use of diverse age groups in future research is suggested.
Bireylerin Yatırım Kararlarında Maruz Kaldığı Anomali ve Hevristikler Üzerine Ampirik Bir ÇalışmaBatuhan Medetoğlu, Arif Saldanlı
Davranışsal finans, bireylerin yatırım kararı verirken birtakım psikolojik, dışsal ve çeşitli faktörler nedeniyle rasyonel olamadığını ve yatırım kararlarını doğru şekilde veremediğini savunmaktadır. Bu çalışma, bireysel yatırımcıların yatırım kararlarında hangi faktörlere maruz kaldığının tespiti amacıyla gerçekleştirilmiştir. Çalışma kapsamında 532 kişiye anket çalışması uygulanmıştır. Analizler SPSS (The Statistical Package for the Social Sciences) programında gerçekleştirilmiştir. Anket cevapları ilk olarak faktör analizine tabi tutulmuştur. Ardından güvenilirlik analizi yapılarak katılımcıların yatırım kararlarında en çok hangi faktörlerin etkili olduğunun tespiti sağlanmıştır. Çalışmada faktörlerin güvenilirlik düzeylerine bakıldığında ise belirlenen sınırların üzerinde olduğu gözlemlenmektedir. Faktörler arasında anlamlı ve pozitif yönlü ilişkinin varlığı da tespit edilmiştir. Elde edilen sonuçlara göre yatırımcıların kararlarında etkilendiği faktörler üç grupta toplanmıştır. Bu faktörler dışsal faktörler ve sürü davranışı, bilişsel yanılsamalar, demografik ve sosyoekonomik özellikler şeklinde tespit edilmiştir. Dışsal faktörler ve sürü davranışı yatırımcılardan bağımsız gerçekleşen durumları, bilişsel yanılsamalar yatırımcıların psikolojik faktörlerden etkilenmelerini, demografik ve sosyoekonomik faktörler ise yatırımcıların özelliklerinden kaynaklanan tutumlarını göstermektedir. Çalışma sonucunda, yatırımcıların yatırım kararlarına etki eden durumlar üç faktörde toplanarak, yatırımcı davranışlarının açıklandığı bulgusu elde edilmiştir. Çalışma sonucunda elde edilen faktörlerin, bireylerin yatırım esnasında maruz kaldığı durumları yansıttığı ve açıkladığı bulgusuna ulaşılmıştır. Çalışmanın sınırlılıkları anket uygulanan kişilerin büyük bir çoğunluğunun benzer yaş aralığında olması gösterilebilir. Daha sonra gerçekleştirilecek çalışmalarda ise farklı gruplar üzerinde çalışma gerçekleştirilmesi önerilmektedir.
Traditional finance theories argue that individuals are rational and make investment decisions without being subjected to any deception. Alternatively, behavioral finance suggests that individuals’ investment decisions are influenced by psychological, exogenous, and other factors, and thus, irrational preferences may be involved. This study aims to determine the factors that affect investment decisions of investors. Homo economicus is a Latin word that means “economic or economic person.” “The Wealth of Nations” written by Adam Smith in 1776 marks the beginning of the classical economics concept and homo economicus. Traditional finance theories accept individuals as rational and consider individuals as homo economicus, i.e., as economic people. Hall (1978) assumes that in his random walk theory, individuals make decisions with rational expectations. Fama (1970) accepts the random walk theory as one of the most basic assumptions based on which the efficient markets hypothesis is formulated. Fama defines the efficient market as the market in which information is fully reflected in current asset prices. The Expectation Theory put forward by Kahneman and Tversky (1979) criticizes the Expected Utility Theory, founded by Daniel Bernoulli, for not taking into account the behavior of individuals. Factors influencing investment decisions can be grouped under three headings, namely, exogenous factors and herd behavior; cognitive illusions; and demographic and socioeconomic factors.
The factors to which investors are exposed were determined by a questionnaire method used in this study. Questionnaires, consisting of 25 questions, were sent to the participants online and their responses were collected via Google Forms. In the study, a 5-point Likert scale was preferred because it is common in the literature. Responses of 532 participants were examined by subjecting them to various analyzes in the SPSS program for determining factors influencing investment decisions. Questionnaire responses were first subjected to factor analysis. Then, by performing a reliability analysis, it was ensured that the most influential factors were determined. It was observed that the reliability level of factors was above the determined limits. The existence of a significant and positive relationship between the factors was also determined. Within the scope of the study, the analysis started with 25 questions. One test question was not included in the analysis. Seven questions were not analyzed as their factor load was insufficient, and thus, the analysis was completed using 17 questions. The measures to evaluate the quality of factor analysis are KMO coefficient, Bartlett’s test, and Sig value. Hair et al. (2010) reported that KMO should be at least 0.50, and the KMO value in this study is 0.91, which is well above the determined threshold. When the total variance values of the study are examined, it is observed that all factors explain 51.69% of the variance. Moreover, when the literature is reviewed, it is observed that the total variance value explained is sufficient.
Reliability analysis is a type of analysis that shows the accuracy and consistency of a study. As the Cronbach’s alpha coefficient approaches 1, the reliability of the measurement tool increases. It is stated that the level of the measurement tool should be 0.70 and above. In this study, 17 questions were analyzed, and the Cronbach’s alpha coefficient was found to be 0.876. Considering this result, it can be stated that the study is at a reliable level. It was also observed that 17 questions are distributed to three factors. These factors express the anomalies and heuristics that affect individuals decision-making ability. The first factor affecting individuals’ investment decisions is exogenous factors and herd behavior. Exogenous factors are factors that arise independently of investments yet have an impact on individuals. Herd behavior appears as a behavior that affects individuals who are exposed to them. The second factor is cognitive illusions that affect individuals’ psychological behavior as well as their investment decisions. The third factor is demographic and socioeconomic factors of investors. Characteristics such as age, gender, and income status also emerge as important determinants influencing investment decisions. It can be concluded that as investment decisions are influenced by these three factors, investors are unable to think rationally and make logical investment decisions. The study’s findings were applied to similar age groups, which can be considered as a limitation. It is recommended that further studies should to be conducted with different age and income groups.