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The purpose of this paper is to explore how heuristics are formed and whether herding and prospect theory act as antecedents to heuristics. The relationship is explored specifically for millennials.

The proposed relationship is explored specifically for millennials. Herding and prospect theory are modelled as antecedents to heuristics. The study uses survey data from 923 millennials from India to test the model for two financial products: equity and mutual funds. Regression analysis is used to evaluate the model.

Findings support the role of herding and prospect theory as antecedents to heuristics of millennials although to varying degrees for equity and mutual fund investments. The impact of herding on heuristics is likely to be smaller for equity investments as compared to mutual fund investments.

The findings provide insights into how heuristics are formed for millennials. The findings add to literature by beginning a new line of inquiry on how heuristics are formed. Since the model is tested on a single generation, future research can test the model on other generations. In addition, future research can also add more antecedents to our proposed model.

Findings from this study can provide financial planners and marketers with an understanding of how heuristics are formed for millennials. Financial planners can use these insights while providing financial advice to this generation and marketers can use them to create more relevant outreach.

Financial investments are an important conduit for financial security. By understanding the cognitive processes that influence financial investment decision-making, it is possible for educators to create content appropriately and for financial planners to advise clients accordingly to enable optimal financial decisions that will be wealth-creating.

Existing literature primarily treats heuristics, herding and prospect theory as being independent of each other. The authors take a novel approach to model the antecedents to heuristics to be herding and prospect theory. The model is tested on millennials for two financial products: equity and mutual funds.

The overall purpose of the study is to identify the impact of heuristics, prospect theory biases and personality traits on property investment decision-making of rank and file individuals in Kosovo, with a concentration in Prishtina, which is the city with the largest number of investors and property transactions in Kosovo.

The present study used quantitative research with the questionnaire used as a research instrument. The questionnaire survey was conducted with 1,209 rank and file property investors in Prishtina, Kosovo. The sampling method used in this research was stratified random sampling.

The study finds that heuristics, prospect theory biases and personality traits as a whole model affect investment decision-making in Prishtina, Kosovo. Nevertheless, the study finds that not all dimensions of the constructed research model (heuristics, the prospect theory and personality) affect the property investment decision-making in Prishtina at the same level. Whereas prospect theory biases (regret aversion, framing and self-control) seem to very strongly influence property investment decision-making of rank and file investors in Prishtina, personality traits (conscientiousness, neuroticism and openness to new experiences) seem not to affect the real estate investment decision-making. Finally, heuristics biases also strongly influence the real estate investment decision-making with a strong statistically significant explanatory power but not to the same degree as prospect theory biases.

The present study contributes toward the understanding of the role that is played by heuristics, prospect theory biases and personality traits in Kosovo's property investment industry. More importantly, the implication of the results of the present study is that it goes some way toward enhancing understanding of heuristic and prospect theory-driven biases and their influence on property investment decision-making in a developing economy. The present study paves the way to further analyze why personality traits do not influence property investment decision-making in Kosovo.

The present study is the first quantification of the impact of heuristics, prospect theory biases and personality traits on the investment decision-making of rank and file individuals in Prishtina, Kosovo.

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.

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.

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.

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.

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.

This study aims to use a qualitative approach to explore and clarify the mechanism by which heuristic-driven biases influence the decisions and performance of individual investors actively trading on the Pakistan Stock Exchange (PSX). It also aims to identify how to overcome the negative effect of heuristic-driven biases, so that finance practitioners can avoid the expensive errors which they cause.

This study adopts an interpretative approach. Qualitative data was collected in semistructured interviews, in which the target population was asked open-ended questions. The sample consists of five brokers and/or investment strategists/advisors who maintain investors’ accounts or provide investment advice to investors on the PSX, who were selected on a convenient basis. The researchers analyzed the interview data thematically.

The results confirm that investors often use heuristics, causing several heuristic-driven biases when trading on the stock market, specifically, reliance on recognition-based heuristics, namely, alphabetical ordering of firm names, name memorability and name fluency, as well as cognitive heuristics, such as herding behavior, disposition effect, anchoring and adjustment, repetitiveness, overconfidence and availability biases. These lead investors to make suboptimal decisions relating to their investment management activities. Due to these heuristic-driven biases, investors trade excessively in the stock market, and their investment performance is adversely affected.

This study provides a practical framework to explore and clarify the mechanism by which heuristic-driven biases influence investment management activities. To the best of authors’ knowledge, the current study is the first to focus on links between heuristic-driven biases, investment decisions and performance using a qualitative approach. Furthermore, with the help of a qualitative approach, the investigators also highlight some factors causing an increased use of heuristic variables by investors and discuss practical approaches to overcoming the negative effects of heuristics factors, so that finance practitioners can avoid repeating the expensive errors which they cause, which also differentiates this study from others.

This study aims to investigate the impact of financial and behavioural factors on investment decisions in the cryptocurrency market within the Gulf Cooperation Council (GCC).

The study uses the cross-sectional absolute deviation methodology developed by Chang et al. (2000) to determine the existence of herding behaviour during extreme conditions in the cryptocurrency market of four GCC countries: Bahrain, Saudi Arabia, Kuwait and UAE. In addition, a questionnaire survey was distributed to 322 investors from the GCC cryptocurrency markets to gather data on their investment decisions.

The study finds that the herding theory, prospect theory and heuristics theory account for 16.5% of the variance in investors' choices in the GCC cryptocurrency market. The regression analysis results show no multicollinearity problems, and a high F-statistic indicates the general model's acceptability in the results.

The study's findings suggest that behavioural and financial factors play a significant role in investors' choices in the GCC cryptocurrency market. The study's results can be used by investors to better understand the impact of these factors on their investment decisions and to develop more effective investment strategies. In addition, the study's findings can be used by policymakers to develop regulations that consider the impact of behavioural and financial factors on the GCC cryptocurrency market.

This study adds to the body of literature in two different ways. Initially, motivated by earlier research examining the impact of behaviour finance factors on investment decisions, the authors look at how the behaviour finance factors affect investment decisions of the GCC cryptocurrency market. To extend most of these studies, this study uses a regime-switching model that accounts for two different market states. Second, by considering the recent crisis and more recent periods involving more cryptocurrencies, the authors have contributed to several studies examining the impact of behavioural financial factors on investment decisions in cryptocurrency markets. In fact, very few studies have examined the impact of behavioural finance on cryptocurrency markets. Therefore, to the best of the authors’ knowledge, this study is the first of its kind to investigate how behavioural finance factors influence investment decisions in the GCC cryptocurrency market. This allows to better illuminate the factors driving herd behaviour in the GCC cryptocurrency market.

This study aims to investigate the behavioural biases influencing the real estate market investing decisions of normal non-professional investors in India.

As the study involves the behavioural data with polytomous response format, psychometric test- graded response model (IRT approach) was used for the study with the help of STATA 14. Multi-stage stratified sampling was used to collect a sample of 560 respondents. The study used a 14-item scale representing behavioural biases derived from two broad behavioural theories, i.e. heuristics and prospect theories. Sample characteristics were checked using SPSS 20. Pre-required assumptions for IRT (i.e. local independence and unidimensionality) were tested by CFA using AMOS 20.

Five items, four of which belong to heuristics (anchoring – 2, representativeness – 1 and availability bias – 1) and one belong to prospect theory (regret aversion) are sufficient to measure the behavioural attitude of real estate investors in the Indian scenario. Item discrimination ai ranged from 0.95 to 1.52 (average value 1.29), showing moderate discrimination power of the items. The items have done a pretty good job of assessing the lower level of agreement. For the higher level of agreement, the scale came out to be less precise, with less information and higher standard error of measurement.

As the behavioural biases are often false, the study suggests the investors not to repeat these nasty biases to improve investment strategies. As they are shared and not easily changeable, understanding these biases may also help them in beating the market by acting as “noise traders”.

The traditional price index is incomplete in some essential respects. The inclusion of these behavioural biases into the construction of price index will greatly improve the traditional price index, policymakers should seriously think about it.

Shelter is one of the basic needs; a dwelling unit is needed for one to stay in, develop and contribute to economy and society. If investors try to minimise these biases and policymakers keep a track of these while making strategies, mispricing in this sector can be controlled to some extent, which will ultimately help in the well-being of society.

This study contributes to the limited research by investigating the behavioural biases influencing the real estate market investment decisions of normal non-professional investors. It contributes to the lacking academe on real estate market in India. The study has used a psychometric test, i.e. the item response theory, for evaluating the quality of the items.

The logic of economic inquiry requires two distinct research programs. One program treats economic life in terms of invariant formal categories across time and place. The other program treats the continual generation of novelty and turbulence through time and human interaction. These programs are not commensurable: one cannot be reduced to the other. The former program must be conveyed by a theory of equilibrium; the latter program requires a process-based theory of emergent phenomena. Roy Weintraub articulated a neo-Walrasian research program in his General Equilibrium Analysis, and here I sketch a complementary neo-Mengerian program. In presenting this sketch, I also explain that needless analytical confusion and antagonism can result from a failure to recognize that economic analysis requires two distinct research programs. As a historical side-bar, Carl Menger probably recognized this situation, as evidenced by his correspondence with Léon Walras.

The learning outcomes are as follows: understanding of the principles of choice overload and the impact of consumer choice overload on company sustainability and growth prospects; understanding of how several heuristics inform consumer decision-making; applying nudge theory to interpret and clarify the impact and consequences of nudges on consumer decision-making; and considering the challenge of a newly appointed CEO to influence consumer choice.

The case study and teaching note offers insights into the use of behavioural economics principles in consumer choice. The case study methodology was used to design, analyse and interpret the real-life application of behavioural economics in the retail sector. The case demonstrates how choice overload, dual process theory, decision heuristics and nudge theory play a role in consumer decision-making. The case offers insights into the application of behavioural economics to support the sustainability of a company in an emerging market context. Managers can use the findings to consider how to use behavioural economics principles to drive consumer choice. The application of behavioural economics to an industry facing challenges of sustainability offers new insights into how to design spaces and cues for consumer choice.

The case study is suitable for course in business administration, specifically at postgraduate level.

Teaching notes are available for educators only.

CSS 8: Marketing

The purpose of this paper is to develop and validate a model of how cognitive biases and framing effects influence managerial decision‐making about strategic initiatives.

Because the author was interested in understanding real‐world practices about strategic decisions, he chose to conduct a quasi‐experimental field study over a three‐year period with managers in a multinational corporation. He developed a questionnaire and a series of vignettes for the independent measures, and examined database records of decisions for the dependent measures.

After validating the instrument items, the author conducted a confirmatory factor analysis for model fit, and then tested the model's predictive ability and interactions. The model indicated that risk aversion, overconfidence, anchoring, and expected utility affected commitment decisions, and these factors interacted with framing effects.

Decision‐makers often fall victim to biases and make sub‐optimal decisions, especially regarding long‐term strategic initiatives. To illustrate, some managers may continue to invest in initiatives that have little or no hope of succeeding because they have already invested heavily in them, or they may prematurely terminate them. An explanatory model is helpful to management and organizational developers to learn how to make optimal decisions using normative rules.

The purpose of this paper is to study the mediating role of organizational trust in the relationship between perceived organizational support and organizational justice on the one hand and their consequences, namely employees’ in-role performance and their levels of organizational cynicism on the other. Along with this, accounting for organizational trust as a mediator and organizational cynicism as a critical consequence the authors aim to contribute to the literature pertaining to these variables.

Random sampling technique was applied. Data were collected from 237 managerial-level employees and 156 of their immediate supervisors of seven privately owned manufacturing and service sector organizations in India. A questionnaire comprising 49 items pertaining to the study constructs was administered. Item analyses were carried out to estimate the reliability of the instrument. A confirmatory factor analysis was conducted to establish the instrument’s construct validity and uniqueness of the study constructs. The hypotheses of the study were tested and competing path models were compared using structural equation modeling (SEM) techniques with maximum likelihood estimates.

All scales were found to have acceptable reliability estimates. Results of the confirmatory factor analysis established that the manifest variables loaded significantly on their latent constructs and that the latent constructs were empirically distinct. This established the scales’ construct validity. The results of the SEM procedures indicated that all hypotheses of the study could be accepted as statistically significant and that organizational trust mediates the path between the independent and the dependent variables.

The study was cross-sectional in design and, as such precluded causal inferences. Data were collected from private sector firms operating in India, and hence, there was a limitation regarding the findings as far as cross-national generalization and generalizability among employees of state-owned enterprises were concerned.

The study identified some practical implications related to its findings. These include meeting the affiliative needs of employees, managers as organizational agents must manifest organizational support by regularly interacting with their subordinates, and that managers should address their reportees not as members of a given department but as members of teams and allocate job assignments accordingly.

The findings of the study lend credibility to an interplay between social exchange ideologies, equity sensitivities, and fairness heuristics. Additionally, the results of this study extend the social exchange-equity theory literature which has placed social exchange variables as predictors of workplace outcomes in an Indian context. This, further leads to the enhancement of positive consequences such as task performance, and reduces negative outcomes such as cynical attitudes towards the organization.

The present research is among the first of its kind to examine the study variables vis-à-vis managerial employees working in India. This study would also qualify to be among the very few studies in India with reference to the social exchange, equity, and fairness heuristics theories.