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Behavioural biases in investment decision making – a systematic literature review

Satish Kumar (Management Studies department, Malaviya National Institute of Technology, India)
Nisha Goyal (Management Studies department, Malaviya National Institute of Technology, India)

Qualitative Research in Financial Markets

ISSN: 1755-4179

Article publication date: 2 February 2015

Abstract

Purpose

The purpose of this paper is to systematically review the literature published in past 33 years on behavioural biases in investment decision-making. The paper highlights the major gaps in the existing studies on behavioural biases. It also aims to raise specific questions for future research.

Design/methodology/approach

We employ systematic literature review (SLR) method in the present study. The prominence of research is assessed by studying the year of publication, journal of publication, country of study, types of statistical method, citation analysis and content analysis on the literature on behavioural biases. The present study is based on 117 selected articles published in peer- review journals between 1980 and 2013.

Findings

Much of the existing literature on behavioural biases indicates the limited research in emerging economies in this area, the dominance of secondary data-based empirical research, the lack of empirical research on individuals who exhibit herd behaviour, the focus on equity in home bias, and indecisive empirical findings on herding bias.

Research limitations/implications

This study focuses on individuals’ behavioural biases in investment decision-making. Our aim is to analyse the impact of cognitive biases on trading behaviour, volatility, market returns and portfolio selection.

Originality/value

The paper covers a considerable period of time (1980-2013). To the best of authors’ knowledge, this study is the first using systematic literature review method in the area of behavioural finance and also the first to examine a combination of four different biases involved in investment decision-making. This paper will be useful to researchers, academicians and those working in the area of behavioural finance in understanding the impact of behavioural biases on investment decision-making.

Keywords

Citation

Kumar, S. and Goyal, N. (2015), "Behavioural biases in investment decision making – a systematic literature review", Qualitative Research in Financial Markets, Vol. 7 No. 1, pp. 88-108. https://doi.org/10.1108/QRFM-07-2014-0022

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited