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Behavioral factors affecting investment decision-making in bank stocks on the Ghana stock exchange

Alexander Quaicoe (Department of Finance, Methodist University College Ghana, Accra, Ghana)
Paul Quaisie Eleke-Aboagye (Department of Accounting and Finance, Methodist University College Ghana, Accra, Ghana)

Qualitative Research in Financial Markets

ISSN: 1755-4179

Article publication date: 9 June 2021

Issue publication date: 27 July 2021

Abstract

Purpose

The finance literature is awash with papers bordering on the classical assumption that investors are rational in their decision-making, and hence, would always take decisions rationally given the right information, thus making the stock market efficient. This assumption has, however, been found to be at least inadequate given the fact that investors are complex psychological beings full of emotions. This paper aims to investigate the psychological factors that tend to influence the decisions of investors.

Design/methodology/approach

The study used a questionnaire to survey a total of 350 investors holding stocks of listed banks on the Ghana Stock Exchange (GSE).

Findings

The study found the existence of various behavioural biases among the investors surveyed. The most dominant factor or bias found to be influencing investment decisions of respondents was herding with nearly 62% weight. Again, biases such as regret aversion and gambler’s fallacy were also found to strongly influence the decisions of investors, along with mental accounting, overconfidence and anchoring.

Practical implications

The presence of these behavioural biases, therefore suggests that investors do not always take rational decisions, and hence, making the stock market efficient and that as psychological beings, their investment decisions are impacted strongly by their psychology.

Originality/value

The study used a questionnaire to survey a total of 350 investors holding stocks of listed banks on the GSE with a special focus on overconfidence, anchoring, herding, gambler’s fallacy, mental accounting and regret aversion as the variables of interest, the first of its kind in Ghana.

Keywords

Citation

Quaicoe, A. and Eleke-Aboagye, P.Q. (2021), "Behavioral factors affecting investment decision-making in bank stocks on the Ghana stock exchange", Qualitative Research in Financial Markets, Vol. 13 No. 4, pp. 425-439. https://doi.org/10.1108/QRFM-05-2020-0084

Publisher

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Emerald Publishing Limited

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