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Article
Publication date: 24 October 2021

Maqsood Ahmad

The aim of this paper is to systematically review the literature published in recognized journals focused on recognition-based heuristics and their effect on investment…

Abstract

Purpose

The aim of this paper is to systematically review the literature published in recognized journals focused on recognition-based heuristics and their effect on investment management activities and to ascertain some substantial gaps related to them.

Design/methodology/approach

For doing research synthesis, systematic literature review approach was applied considering research studies published within the time period, i.e. 1980–2020. This study attempted to accomplish a critical review of 59 studies out of 118 studies identified, which were published in reputable journals to synthesize the existing literature in the behavioural finance domain-related explicitly to recognition-based heuristics and their effect on investment management activities.

Findings

The survey and analysis suggest investors consistently rely on the recognition-based heuristic-driven biases when trading stocks, resulting in irrational decisions, and an investment strategy constructed by implementing the recognition-based heuristics, would not result in better returns to investors on a consistent basis. Institutional investors are less likely to be affected by these name-based behavioural biases in comparison to individual investors. However, under the context of ecological rationality, recognition-based heuristics work better and sometimes dominate the classical methods. The research scholars from the behavioural finance community have highlighted that recognition-based heuristics and their impact on investment management activities are high profile areas, needed to be explored further in the field of behavioural finance. The study of recognition-based heuristic-driven biases has been found to be insufficient in the context of emerging economies like Pakistan.

Practical implications

The skilful understanding and knowledge of the recognition-based heuristic-driven biases will help the investors, financial institutions and policy-makers to overcome the adverse effect of these behavioural biases in the stock market. This article provides a detailed explanation of recognition-based heuristic-driven biases and their influence on investment management activities which could be very useful for finance practitioners’ such as 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 its financial management strategies.

Originality/value

Currently, no recent study exists, which reviews and evaluates the empirical research on recognition-based heuristic-driven biases displayed by investors. The current study is original in discussing the role of recognition-based heuristic-driven biases in investment management activities by means of research synthesis. This paper is useful to researchers, academicians, and those working in the area of behavioural finance in understanding the role that recognition-based heuristics plays in investment management activities.

Details

Qualitative Research in Financial Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1755-4179

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Article
Publication date: 3 September 2021

Joseph Emmanuel Tetteh and Christopher Boachie

This paper attempts to investigate the influence of psychological biases on saving decision-making of bank customers in Ghana.

Abstract

Purpose

This paper attempts to investigate the influence of psychological biases on saving decision-making of bank customers in Ghana.

Design/methodology/approach

It employs weighted least squares regression to test the effect of psychological biases on savings decisions of bank customers.

Findings

The findings show that all the nine psychological biases, namely mental accounting, availability, loss aversion, representativeness, anchoring, overconfidence, status quo, framing effect and disposition effect employed for the study have a significant influence on saving decision of bank customers. The results depict that psychological biases are entrenched in the saving pattern of bank customers in Ghana.

Practical implications

For policy purposes, the study recommends that bank customers need to enhance their knowledge of psychological biases in order to improve their gains from savings, and not to fall prey to these prejudices. The satisfied customer is a dependable source of bank viability and survival.

Originality/value

To the best of the knowledge of the author, this study provides the first empirical evidence of the influence of psychological biases on saving decisions of bank customers in Ghana. The findings of this study will enhance knowledge on the influence of psychological biases on individual decision-making and will accentuate the fact that the individual is not an entirely rational being.

Details

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

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Article
Publication date: 28 September 2021

Jennifer Griffith, Mary Fran T. Malone and Christine M. Shea

Bystander intervention mitigates the negative impact of bias incidents in the workplace. However, intervention tends to be viewed as binary: intervention occurred or it…

Abstract

Purpose

Bystander intervention mitigates the negative impact of bias incidents in the workplace. However, intervention tends to be viewed as binary: intervention occurred or it did not. Consequently, research has focused on conditions under which witnesses of bias incidents choose to intervene, and less is known about how witnesses may intervene. This paper elucidates the intervention behavior choices available to witnesses of bias incidents and develops a bystander intervention behavior (BIB) scale.

Design/methodology/approach

To develop the scale, the authors used the three-phased act frequency methodology. In phase I, the authors surveyed faculty who had both witnessed a bias incident and seen someone intervene to address it. The authors asked these faculties to list the observed bystander intervention behaviors they had personally observed. In Phase II, different survey respondents and subject matter experts assessed the prototypicality of each of the behaviors in relation to the concept of bystander intervention. In phase III, the authors tested the validity and reliability of the resulting 18-item scale and assessed the ability of bystander intervention behavior to mitigate the negative impact of bias incidents on the academic workplace.

Findings

The BIB scale consists of two theoretically derived, empirically validated and reliable dimensions; it can be used as a summary score to evaluate the extent to which colleagues intervene indirectly and directly when a bias incident occurs in the academic workplace.

Originality/value

This scale is valuable in advancing efforts to mitigate the negative effect of bias in the workplace and training colleagues to intervene in various ways when bias occurs.

Details

Equality, Diversity and Inclusion: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-7149

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Article
Publication date: 21 September 2021

S. Yamini and M.S. Gajanand

The paper provides a comprehensive overview of the biases in inventory decisions, under the umbrella of behavioural operations, considering research findings that used…

Abstract

Purpose

The paper provides a comprehensive overview of the biases in inventory decisions, under the umbrella of behavioural operations, considering research findings that used experimental methods. Research in this field has gained traction but, to the best of our knowledge, review articles that summarize these research findings are scarce. Hence, there is a need to synthesize the anomalies and biases reported in inventory decision-making literature to gain a more integrated understanding.

Design/methodology/approach

This study reviews themes relevant to inventory and behavioural operations management from the articles published in recognized top-tier journals during the period between 2000 and 2020 with an aim to build a classification framework. Further, using a systematic review procedure, the relevant research studies are divided into sub-sections and appropriate search strategies are adopted to pleat more information on inventory ordering biases.

Findings

This study presents a classification framework by highlighting the factors influencing the biases in inventory decisions and describes the effects of utility preferences on the decision-making behaviour. It highlights the inventory ordering pattern under unconventional settings and also for different supply chain settings. This systematic review helps in identifying the research gap and in giving directions for future researchers.

Originality/value

The study presents a systematic review and detailed analysis of the research in inventory decision making through a behavioural lens. The study shows a clear direction of progress over the years, and implies new directions for looking beyond placing orders and for moving towards a more integrated approach while making supply chain decisions. It will be useful for researchers and practitioners working on newsvendor decisions, supply chain contracts, behavioural economics, behavioural operations management, bounded rationality theory and experimental economics.

Details

Benchmarking: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1463-5771

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Article
Publication date: 2 October 2021

Michael Mehmet, Troy Heffernan, Jennifer Algie and Behnam Forouhandeh

The purpose of this paper is to examine how upstream social marketing can benefit from using social media commentary to identify cognitive biases. Using reactions to…

Abstract

Purpose

The purpose of this paper is to examine how upstream social marketing can benefit from using social media commentary to identify cognitive biases. Using reactions to leading media/news publications/articles related to climate and energy policy in Australia, this paper aims to understand underlying community cognitive biases and their reasonings.

Design/methodology/approach

Social listening was used to gather community commentary about climate and energy policy in Australia. This allowed the coding of natural language data to determine underlying cognitive biases inherent in the community. In all, 2,700 Facebook comments were collected from 27 news articles dated between January 2018 and March 2020 using exportcomments.com. Team coding was used to ensure consistency in interpretation.

Findings

Nine key cognitive bias were noted, including, pessimism, just-world, confirmation, optimum, curse of knowledge, Dunning–Kruger, self-serving, concision and converge biases. Additionally, the authors report on the interactive nature of these biases. Right-leaning audiences are perceived to be willfully uninformed and motivated by self-interest; centric audiences want solutions based on common-sense for the common good; and left-leaning supporters of progressive climate change policy are typically pessimistic about the future of climate and energy policy in Australia. Impacts of powerful media organization shaping biases are also explored.

Research limitations/implications

Through a greater understanding of the types of cognitive biases, policy-makers are able to better design and execute influential upstream social marketing campaigns.

Originality/value

The study demonstrates that observing cognitive biases through social listening can assist upstream social marketing understand community biases and underlying reasonings towards climate and energy policy.

Details

Journal of Social Marketing, vol. 11 no. 4
Type: Research Article
ISSN: 2042-6763

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Article
Publication date: 1 February 1995

Ronald J. Burke

Examines the relationship of individual demographiccharacteristics, work‐setting factors and work outcomes to perceivedbias, both personally experienced and observed in…

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935

Abstract

Examines the relationship of individual demographic characteristics, work‐setting factors and work outcomes to perceived bias, both personally experienced and observed in organizational decision making. Data were collected from 829 women and 766 men employed in a single professional services firm using anonymously completed questionnaires. Although both women and men perceived bias, women reported significantly higher levels of both personally experienced and observed bias. Perceived bias was correlated with work settings and work outcomes similarly for women and men. Women and men experiencing and observing more bias, described the work setting as less favourable and were less satisfied, more likely to quit and saw the organization as less committed to fairness and due process. Draws implications for management and organizations.

Details

International Journal of Career Management, vol. 7 no. 1
Type: Research Article
ISSN: 0955-6214

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Article
Publication date: 1 August 2003

Idil Sayrac Yaveroglu, Naveen Donthu and Adriana Garcia

Using a large‐scale database of a major business services company, self‐reported usage volume data were compared with actual usage volume. Several business‐related factors…

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1601

Abstract

Using a large‐scale database of a major business services company, self‐reported usage volume data were compared with actual usage volume. Several business‐related factors were then examined in relation to the survey response bias. Survey response bias was found to be lower for clients that use the services more extensively, had been in business for a longer period of time, and have smaller number of employees. Survey response bias was also found to be lower when the level of involvement with the service (lower level of management in this study) was greater. Such response bias information would be useful for managers when making sales forecasts or market share estimations using survey responses.

Details

Journal of Business & Industrial Marketing, vol. 18 no. 4/5
Type: Research Article
ISSN: 0885-8624

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Article
Publication date: 16 January 2009

Thomas B. Christie

The purpose of this paper is to reveal perceptions of news organization bias among people who use the internet.

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1367

Abstract

Purpose

The purpose of this paper is to reveal perceptions of news organization bias among people who use the internet.

Design/methodology/approach

Data for this study were drawn from the Pew Research Center June 2005 News Interest Index. Respondents were asked if news organizations were politically biased in their reporting. Another question asked respondents if news organizations had a liberal or conservative bias. The final question asked respondents to judge news organization bias on political and social issues.

Findings

In two of the three perceptions of internet user/non‐user ratings of ideological bias in news organizations, internet news users surveyed rate news organizations as more biased than non‐users. However, when asked to ascertain either liberal or conservative bias in news organizations, non‐internet news users were more likely to claim that news organizations were biased.

Research limitations/implications

More valid measures of the dimension of liberal and conservative bias could help in analyzing the effect of this particular variable on the use of the internet for news. Also, there is the possibility of some confusion in identifying internet news sources.

Practical implications

Advertising revenue of traditional media could decline as news use shifts to internet sources, and customers of the traditional US news networks would continue to migrate to the internet.

Originality/value

As this new media technology has the potential to reach new markets throughout the world, consumers who perceive that traditional news media are ideologically biased may favor the new medium over more traditional sources of news.

Details

Competitiveness Review: An International Business Journal, vol. 19 no. 1
Type: Research Article
ISSN: 1059-5422

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Article
Publication date: 30 July 2018

Himani Oberai and Ila Mehrotra Anand

Unconscious biases are often ignored in organizations; thus, it becomes more important to identify them so that we can build strong and competent organizations. In present…

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5498

Abstract

Purpose

Unconscious biases are often ignored in organizations; thus, it becomes more important to identify them so that we can build strong and competent organizations. In present dynamic and competitive business situations, you need to be well aware about those concerns of the organizations where these biases exist.

Design/methodology/approach

This paper identifies various types of unconscious biases prevailing at workplace. It also identifies different strategies which can be used to avoid them so that we can gain a competitive edge over others in market.

Findings

Unconscious biases are a fact of life; no one can deny them. Thus, it is important to identify them so that they can be eliminated, and our businesses can avoid their detrimental effects.

Research limitations/implications

Unconscious biases narrow down the pool of people in an organization and ultimately destabilize an organization’s base.

Practical implications

Unconscious biases narrow down the pool of people in the organization and ultimately destabilize an organization’s base.

Originality/value

This paper can help managers and executives to highlight the areas where these biases lie so that they can be removed easily.

Details

Human Resource Management International Digest, vol. 26 no. 6
Type: Research Article
ISSN: 0967-0734

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Article
Publication date: 6 July 2021

Shiba Prasad Parhi and Manas Kumar Pal

The purpose of the study is to check whether Indian high net worth individual (HNI) investors are suffering from overconfidence bias in personal life and in-stock…

Abstract

Purpose

The purpose of the study is to check whether Indian high net worth individual (HNI) investors are suffering from overconfidence bias in personal life and in-stock investment approach. The study is to benchmark an ideal behaviour that an investor should exhibit under the overconfidence bias.

Design/methodology/approach

Both qualitative and quantitative methods were used to study the Indian HNI investors with overconfidence bias. As a first step, an exploratory study was conducted to identify the variables to define overconfidence bias. An extensive literature review along with in-depth interviews was conducted amongst investors, fund managers and the subject experts to check the content validity of the variables. The survey instrument was designed based on the objective of the study and theoretical framework. Both descriptive and inferential statistical tools such as the Z proportion test, logistic regression and structural equation model were applied to test the hypotheses.

Findings

It was found that there is a moderate impact of overconfidence bias amongst the investors both in normal life and whilst making investments in stock. This study found the influence of overconfidence bias in stock investment with respect to forecasting of the stock price movements, overtrading, overanalysis and overreaction.

Research limitations/implications

This paper will help in understanding the Indian HNI investors’ behaviour under the impact of overconfidence bias. There is an empirical study to understand the implication of overconfidence bias on stock investors specifically for the HNI investors.

Practical implications

This study gives an insight into the fund managers to understand the Indian HNI investment behaviour. It is also helpful for HNI investors to understand and correct their behavioural biases related to overconfidence.

Social implications

This paper will guide investors to understand the symptoms and repercussions of overconfidence bias in stock investment. They can also realize the subtle impact of overconfidence bias in personal and professional life, thus preventing them from making losses.

Originality/value

This work is the extension of the works of Terrace Odean on behavioural finance in the Indian Stock Investors' context. The concept of overconfidence bias and its implications of finance were developed by Kahneman and Tversky, and later by other behavioural finance researchers such as Malmendier, Hirshleifer, DeBondt, Odean, Barber, Shefrin and others. This paper studies stock investing behaviour with specific reference to Indian HNI investors.

Details

Benchmarking: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1463-5771

Keywords

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