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Open Access
Article
Publication date: 20 June 2022

Rangapriya Saivasan and Madhavi Lokhande

Investor risk perception is a personalized judgement on the uncertainty of returns pertaining to a financial instrument. This study identifies key psychological and…

Abstract

Purpose

Investor risk perception is a personalized judgement on the uncertainty of returns pertaining to a financial instrument. This study identifies key psychological and demographic factors that influence risk perception. It also unravels the complex relationship between demographic attributes and investor's risk attitude towards equity investment.

Design/methodology/approach

Exploratory factor analysis is used to identify factors that define investor risk perception. Multiple regression is used to assess the relationship between demographic traits and factor groups. Kruskal–Wallis test is used to ascertain whether the factors extracted differ across demographic categories. A risk perception framework based on these findings is developed to provide deeper insight.

Findings

There is evidence of the relationship and influence of demographic factors on risk propensity and behavioural bias. From this study, it is apparent that return expectation, time horizon and loss aversion, which define the risk propensity construct, vary significantly based on demographic traits. Familiarity, overconfidence, anchoring and experiential biases which define the behavioural bias construct differ across demographic categories. These factors influence the risk perception of an individual with respect to equity investments.

Research limitations/implications

The reference for the framework of this study is limited as there has been no precedence of similar work in academia.

Practical implications

This paper establishes that information seekers make rational decisions. The paper iterates the need for portfolio managers to develop and align investment strategies after evaluation of investors' risk by including these behavioural factors, this can particularly be advantageous during extreme volatility in markets that concedes the possibility of irrational decision making.

Social implications

This study highlights that regulators need to acknowledge the investor's affective, cognitive and demographic impact on equity markets and align risk control measures that are conducive to market evolution. It also creates awareness among market participants that psychological factors and behavioural biases can have an impact on investment decisions.

Originality/value

This is the only study that looks at a three-dimensional perspective of the investor risk perception framework. The study presents the relationship between risk propensity, behavioural bias and demographic factors in the backdrop of “information” being the mediating variable. This paper covers five characteristics of risk propensity and eight behavioural biases, such a vast coverage has not been attempted within the academic realm earlier with the aforesaid perspective.

Details

Asian Journal of Economics and Banking, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2615-9821

Keywords

Article
Publication date: 12 November 2019

Saurabh Gupta and Saumitra N. Bhaduri

The purpose of this paper is to investigate investor behavior under two broad categories, market-wide sentiment and herding.

Abstract

Purpose

The purpose of this paper is to investigate investor behavior under two broad categories, market-wide sentiment and herding.

Design/methodology/approach

Using a dynamic factor model, that extracts distinct latent factors representing fluctuations in asset returns due to changes in fundamentals as well as investors’ sentiments, the paper investigates the impact of investor behavior on asset pricing.

Findings

Consistent with the literature, the results suggest that the behavioral factors play a significant role in explaining variation in the asset prices. However, the degree of influence depends on the nature of the stocks or portfolios. The findings conform to the hypothesis that behavioral factors play a more important role in explaining the price movements of high and medium valued stocks than those of smaller valued stocks. Further, the behavioral factors also exhibit high auto-correlation, depicting the pervasive nature of such factors, and proving that information cascades and other behavioral mechanisms propagate over a period of time leading to bubbles and market crashes. Finally, since herding is often associated with market volatility, the authors test the hypothesis using two measures of volatility and the result shows positive significant associations between them as suggested in the literature.

Originality/value

The paper presents a dynamic factor model to study the impact of investor behavior on asset returns using a conventional three factors model with behavioral factors. A factor model is proposed to extract distinct latent factors representing fluctuations in asset returns due to changes in fundamentals as well as investors’ sentiments. The study investigates investor behavior under two broad categories, market-wide sentiment and herding. Consistent with the literature, the results suggest that the behavioral factors play a significant role in explaining variation in the asset prices. However, the degree of influence depends on the nature of the stocks or portfolios. The findings conform to the hypothesis that behavioral factors play a more important role in explaining the price movements of high and medium valued stocks than those of smaller valued stocks. Further, the behavioral factors also exhibit high auto-correlation, depicting the pervasive nature of such factors, and proving that information cascades and other behavioral mechanisms propagate over a period of time leading to bubbles and market crashes.

Details

Review of Behavioral Finance, vol. 11 no. 4
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 1 July 2006

Sandeep Grover, V.P. Agrawal and I.A. Khan

To represent the effect of ‘human factors in total quality management (TQM) environment’ in terms of a single numerical index by considering their inheritances and interactions.

2593

Abstract

Purpose

To represent the effect of ‘human factors in total quality management (TQM) environment’ in terms of a single numerical index by considering their inheritances and interactions.

Design/methodology/approach

Various human factors affecting the TQM culture in an organization are identified and discussed for the sub factors affecting them. These factors are interacting with each other and their overall effect helps an organization in attaining TQM enabled needs. The paper attempts to represent the overall effect of human factors quantitatively by developing a mathematical model using graph theoretic approach. In this approach, interaction among identified human factors is represented through digraph, matrix model and a multinomial.

Findings

The extent of human aspects present in an organization, conducive to TQM culture is represented in terms of the “human index”. It provides an insight into the human factors at system and subsystem level. The developed procedure may be useful for self‐analysis and comparison among organizations.

Research limitations/implications

Since, human behaviour is difficult to predict, so are the human factors. The paper considers general factors, which may vary depending on type of organization, size of organization and geographical location. There is a scope of research in factor specific organizations.

Practical implications

It provides a useful methodology for organizations to assess human aspects and improve upon therein. Procedure for stepwise application of methodology is given with example that may help an industry to implement it.

Originality/value

The paper attempts to quantify the intangibles through systematic approach and is of value to industries to improve upon their work environment.

Details

Benchmarking: An International Journal, vol. 13 no. 4
Type: Research Article
ISSN: 1463-5771

Keywords

Content available
Article
Publication date: 23 March 2022

Eric Amankwa, Marianne Loock and Elmarie Kritzinger

This paper aims to examine the individual and combined effects of organisational and behavioural factors on employees’ attitudes and intentions to establish an information…

Abstract

Purpose

This paper aims to examine the individual and combined effects of organisational and behavioural factors on employees’ attitudes and intentions to establish an information security policy compliance culture (ISPCC) in organisations.

Design/methodology/approach

Based on factors derived from the organisational culture theory, social bond theory and accountability theory, a testable research model was developed and evaluated in an online survey that involves the use of a questionnaire to collect quantitative data from 313 employees, from ten different organisations in Ghana. The data collected were analysed using the partial least squares-structural equation modelling approach, involving the measurement and structural model tests.

Findings

The study reveals that the individual measures of accountability – identifiability (2.4%), expectations of evaluation (38.8%), awareness of monitoring (55.7%) and social presence (−41.2%) – had weak to moderate effects on employees’ attitudes towards information security policy compliance. However, the combined effect showed a significant influence. In addition, organisational factors – supportive organisational culture (15%), security compliance leadership (2%) and user involvement (63%) – showed positive effects on employees’ attitudes. Further, employees’ attitudes had a substantial influence (65%), while behavioural intentions demonstrated a weak effect (24%) on the establishment of an ISPCC in the organisation. The combined effect also had a substantial statistical influence on the establishment of an ISPCC in the organisation.

Practical implications

Given the findings of the study, information security practitioners should implement organisational and behavioural factors that will have an impact on compliance, in tandem, with the organisational effort to build a culture of compliance for information security policies.

Originality/value

The study provides new insights on how to address the problem of non-compliance with regard to the information security policy in organisations through the combined application of organisational and behavioural factors to establish an information security policy compliance culture, which has not been considered in any past research.

Details

Information & Computer Security, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2056-4961

Keywords

Article
Publication date: 8 May 2018

Syed Aliya Zahera and Rohit Bansal

The purpose of this paper is to study and describe several biases in investment decision-making through the review of research articles in the area of behavioral finance…

9499

Abstract

Purpose

The purpose of this paper is to study and describe several biases in investment decision-making through the review of research articles in the area of behavioral finance. It also includes some of the analytical and foundational work and how this has progressed over the years to make behavioral finance an established and specific area of study. The study includes behavioral patterns of individual investors, institutional investors and financial advisors.

Design/methodology/approach

The research papers are analyzed on the basis of searching the keywords related to behavioral finance on various published journals, conference proceedings, working papers and some other published books. These papers are collected over a period of year’s right from the time when the most introductory paper was published (1979) that contributed this area a basic foundation till the most recent papers (2016). These articles are segregated into biases wise, year-wise, country-wise and author wise. All research tools that have been used by authors related to primary and secondary data have also been included into our table.

Findings

A new era of understanding of human emotions, behavior and sentiments has been started which was earlier dominated by the study of financial markets. Moreover, this area is not only attracting the, attention of academicians but also of the various corporates, financial intermediaries and entrepreneurs thus adding to its importance. The study is more inclined toward the study of individual and institutional investors and financial advisors’ investors but the behavior of intermediaries through which some of them invest should be focused upon, narrowing down population into various variables, targeting the expanding economies to reap some unexplained theories. This study has identified 17 different types of biases and also summarized in the form of tables.

Research limitations/implications

The study is based on some of the most recent findings to have a quick overview of the latest work carried out in this area. So far very few extensive review papers have been published to highlight the research work in the area of behavioral finance. This study will be helpful for new researches in this field and to identify the areas where possible work can be done.

Practical implications

Practical implication of the research is that companies, policymakers and issuers of securities can watch out of investors’ interest before issuing securities into the market.

Social implications

Under the Social Implication, investors can recognize several behavioral biases, take sound investment decisions and can also minimize their risk.

Originality/value

The essence of this paper is the identification of 17 types of biases and the literature related to them. The study is based on both, the literature on investment decisions and the biases in investment decision-making. Such study is less prevalent in the developing country like India. This paper does not only focus on the basic principles of behavioral finance but also explain some emerging concepts and theories of behavioral finance. Thus, the paper generates interest in the readers to find the solutions to minimize the effect of biases in decision-making.

Details

Qualitative Research in Financial Markets, vol. 10 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 28 June 2022

Maqsood Ahmad

This article aims to systematically review the literature published in recognized journals focused on cognitive heuristic-driven biases and their effect on investment…

Abstract

Purpose

This article aims to systematically review the literature published in recognized journals focused on cognitive heuristic-driven biases and their effect on investment management activities and market efficiency. It also includes some of the research work on the origins and foundations of behavioral finance, and how this has grown substantially to become an established and particular subject of study in its own right. The study also aims to provide future direction to the researchers working in this field.

Design/methodology/approach

For doing research synthesis, a systematic literature review (SLR) approach was applied considering research studies published within the time period, i.e. 1970–2021. This study attempted to accomplish a critical review of 176 studies out of 256 studies identified, which were published in reputable journals to synthesize the existing literature in the behavioral finance domain-related explicitly to cognitive heuristic-driven biases and their effect on investment management activities and market efficiency as well as on the origins and foundations of behavioral finance.

Findings

This review reveals that investors often use cognitive heuristics to reduce the risk of losses in uncertain situations, but that leads to errors in judgment; as a result, investors make irrational decisions, which may cause the market to overreact or underreact – in both situations, the market becomes inefficient. Overall, the literature demonstrates that there is currently no consensus on the usefulness of cognitive heuristics in the context of investment management activities and market efficiency. Therefore, a lack of consensus about this topic suggests that further studies may bring relevant contributions to the literature. Based on the gaps analysis, three major categories of gaps, namely theoretical and methodological gaps, and contextual gaps, are found, where research is needed.

Practical implications

The skillful understanding and knowledge of the cognitive heuristic-driven biases will help the investors, financial institutions and policymakers to overcome the adverse effect of these behavioral biases in the stock market. This article provides a detailed explanation of cognitive heuristic-driven biases and their influence on investment management activities and market efficiency, which could be very useful for finance practitioners, such as an investor who plays at the stock exchange, a portfolio manager, a financial strategist/advisor in an investment firm, a financial planner, an investment banker, a trader/broker at the stock exchange or a financial analyst. But most importantly, the term also includes all those persons who manage corporate entities and are responsible for making their financial management strategies.

Originality/value

Currently, no recent study exists, which reviews and evaluates the empirical research on cognitive heuristic-driven biases displayed by investors. The current study is original in discussing the role of cognitive heuristic-driven biases in investment management activities and market efficiency as well as the history and foundations of behavioral finance by means of research synthesis. This paper is useful to researchers, academicians, policymakers and those working in the area of behavioral finance in understanding the role that cognitive heuristic plays in investment management activities and market efficiency.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 9 November 2015

Koushiki Choudhury

The purpose of this paper is to explore how the different dimensions of service quality influence customers’ behavioural intentions in the private and public sector banks…

2246

Abstract

Purpose

The purpose of this paper is to explore how the different dimensions of service quality influence customers’ behavioural intentions in the private and public sector banks, that is, in class and mass banking, respectively, and the implications for the service provider, consumer, society and consumer policy.

Design/methodology/approach

A contextually modified SERVQUAL instrument was used to capture customers’ perceptions of service quality followed by exploratory factor analysis to study the dimensionality of service quality in retail banking. Multiple regression was used to probe the influence of the dimensions of service quality on customers’ behavioural intentions.

Findings

The study revealed four dimensions of service quality in retail banking, namely, customer-orientedness, reliability, tangibles and convenience and showed that the service quality factor customer-orientedness comprising of the responsiveness and attitude of employees is most important in influencing customers’ behavioural intentions in the case of private sector banks and reliability of the service is most influential in the case of public sector banks.

Research limitations/implications

Future research can focus on “service excellence” being extended beyond assessment of the quality of services, towards evaluation of the quality of life outcomes, to which public organizations contribute, appraisal of the quality of public governance processes and quality of performance in meeting social objectives.

Practical implications

Retail bank managers must realize the importance of employees providing competent, reliable service in the case of public sector banks and their responsiveness and behaviour towards customers in the case of private sector banks, as the keys to foster a culture of service excellence.

Social implications

High-quality financial consumer policy must not only be able to increase customer satisfaction with financial services but also build security and trust in public administration through transparent processes and accountability. In this context, with public agencies being regarded as service providers and citizens as customers, the concept of quality must also visualize public agencies as catalysts of a responsible and active civic society.

Originality/value

This study explores the relationship between service quality and customers’ behavioural intentions in the private and public sector banks by linking both constructs at their dimensional level. It highlights major implications for the service provider, society, consumer and public policy based on the different needs, characteristics and requirements of customers of class and mass banking, that is, private and public sector banks.

Details

Asia Pacific Journal of Marketing and Logistics, vol. 27 no. 5
Type: Research Article
ISSN: 1355-5855

Keywords

Article
Publication date: 13 December 2018

Shakti Bodh Bhatnagar, Jitendra Kumar Mishra and Asif Ali Syed

The literature on customer behaviour has attracted significant attention towards customer loyalty; however, customer disloyalty has not been adequately studied. The…

Abstract

Purpose

The literature on customer behaviour has attracted significant attention towards customer loyalty; however, customer disloyalty has not been adequately studied. The purpose of this paper is to identify factors leading to customer disloyalty and develop a comprehensive framework for understanding various dimensions of customer disloyalty in retail banking services.

Design/methodology/approach

The study is descriptive in nature. Variables associated with customer disloyalty were identified from literature and subsequently factor analysis has been applied to derive the significant factors leading to customer disloyalty. Data were collected through a structured questionnaire administered to 357 retail banking customers. EFA and CFA have been employed to determine relevant factors.

Findings

This study found that customer disloyalty comprises of, both, attitudinal and behavioural components. Further, the study revealed three factors – unfair practices, unfulfilled services and poor interaction leading to behavioural disloyalty and negative image leading to attitudinal disloyalty. Surprisingly, the study found that pricing and competitor’s attraction do not affect, both, attitudinal disloyalty and behavioural disloyalty.

Research limitations/implications

The study contributes to customer behaviour literature by understanding customer disloyalty as a distinct concept in comparison to much prevalent customer switching. It addition, this study empirically identified factors leading to behavioural disloyalty and attitudinal disloyalty.

Originality/value

The originality lies in that fact that it is the only empirical study which has studied customer disloyalty through attitudinal disloyalty lenses. Subsequently, it has also attempted to fill the gap in available literature by studying the relationship between attitudinal disloyalty and behavioural disloyalty.

Details

Asia-Pacific Journal of Business Administration, vol. 11 no. 1
Type: Research Article
ISSN: 1757-4323

Keywords

Article
Publication date: 2 August 2019

Martinette Kruger

The purpose of this paper is to fill the gap in the literature by focusing on the profile and loyalty of visitors to a literary arts festival in South Africa. In addition…

Abstract

Purpose

The purpose of this paper is to fill the gap in the literature by focusing on the profile and loyalty of visitors to a literary arts festival in South Africa. In addition, this research advocates that festivals can influence visitors’ supplementary behavioural intentions and actions beyond loyalty in the form of literary arts appreciation, purchases and tourism.

Design/methodology/approach

A visitor survey was conducted at one of the oldest literary arts festivals in the country where a total of 391 completed self-administered questionnaires were obtained. The statistical analyses comprised three factor analyses (motives to attend the festival, satisfaction with the festival offering elements and behavioural intentions) as well as structural equation modelling, to establish the relationship between the motives, evaluation of the “festivalscapes”, behavioural intentions and loyalty.

Findings

The findings confirmed that literary arts festival loyalty is the principle behavioural intention that will occur after attending a literary arts festival. However, the results demonstrated that literary arts festivals also have the potential to increase and stimulate supplementary behavioural intentions in the form of greater awareness of the arts, increased purchasing behaviour of literary works, increased travel to support the literary arts and greater personal involvement.

Practical implications

Festivals, irrespective of the art form that they showcase, therefore, play a significant role in encouraging and increasing purchasing behaviour, which is vital to the viability and continuation of the arts industry.

Originality/value

This is one of the first studies to research the literary arts festival market in South Africa, thereby making a distinct contribution by expanding the literature on the needs of this neglected market and the aspects that influence loyalty to these types of festivals.

Details

International Journal of Event and Festival Management, vol. 10 no. 2
Type: Research Article
ISSN: 1758-2954

Keywords

Article
Publication date: 5 June 2017

Martinette Kruger and Melville Saayman

The purpose of this paper is to determine whether a music festival leads to additional intangible benefits such as the appreciation of the specific music genre and music…

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Abstract

Purpose

The purpose of this paper is to determine whether a music festival leads to additional intangible benefits such as the appreciation of the specific music genre and music tourism. This was done by using visitors’ behavioural intentions related to these benefits as a tool for market segmentation.

Design/methodology/approach

The research followed a quantitative approach by conducting a visitor survey at an international jazz festival in South Africa.

Findings

The results showed that visitors’ post-festival behavioural intentions are a useful market segmentation tool. This approach revealed three distinct market segments with different levels of post-festival behavioural intentions (high, medium, and low). The results further showed that music festivals have the potential to create benefits beyond the festival itself or the host destination in the form of music tourism and the appreciation of a music genre. However, influencing visitors’ behavioural intentions can only be achieved by a thorough understanding of the characteristics of the market.

Originality/value

This research applied an innovative market segmentation approach that showed the post-festival behavioural intentions of different visitor segments at a music festival. The findings confirm that music festivals can have far-reaching benefits that can contribute to their legacy.

Details

International Journal of Event and Festival Management, vol. 8 no. 2
Type: Research Article
ISSN: 1758-2954

Keywords

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