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Article
Publication date: 26 March 2019

Renu Isidore R. and Christie P.

The purpose of this paper is to test the relationship between the annual income earned by the investors and eight behavioural biases exhibited by the investors such as…

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Abstract

Purpose

The purpose of this paper is to test the relationship between the annual income earned by the investors and eight behavioural biases exhibited by the investors such as mental accounting, anchoring, gambler’s fallacy, availability, loss aversion, regret aversion, representativeness and overconfidence.

Design/methodology/approach

The relationship is derived based on a questionnaire survey conducted on 436 secondary equity investors residing in Chennai, India.

Findings

Analysis of variance test was performed on the normalised and non-normalised version of the biases divided in terms of the annual income earned by the investor. The test found that for the significant biases except the overconfidence bias, the investors with higher annual income were less prone to the biases when compared to investors with lower annual income. On the other hand, with respect to the overconfidence bias, the investors with higher annual income were prone to exhibit overconfidence bias when compared to the investors with lower annual income. Correlation analysis showed that the investors with high annual income were more likely to exhibit higher overconfidence bias but lower representativeness, loss aversion, availability and mental accounting biases.

Originality/value

A contribution in the financial and economic front which would benefit the financial advisors to now consider the income earned by the clients as an important factor while giving financial advice to the clients and while guiding them about the biases they are prone to exhibit.

Details

Journal of Economics, Finance and Administrative Science, vol. 24 no. 47
Type: Research Article
ISSN: 2077-1886

Keywords

Article
Publication date: 15 October 2020

Renu Isidore R., P. Christie and C. Joe Arun

Decision-making in the equity market has been a challenging task for investors belonging to all age groups. This study aims to find linkages between the decision-making…

Abstract

Purpose

Decision-making in the equity market has been a challenging task for investors belonging to all age groups. This study aims to find linkages between the decision-making techniques in the equity market and the biological age of the investor.

Design/methodology/approach

This is an exploratory study and by surveying a sample of 436 secondary equity investors residing in the Chennai region of India, the study measured the decision-making techniques. Using the ANOVA test, the decision-making technique mostly used by investors belonging to an age category was determined. Further, the linkages were investigated in isolation for the male and female investors. By using regression analysis, a model was developed to predict the actual equity return. The financial characteristics of the various age groups were also analyzed using cross-tabulation.

Findings

The results of the study show that the age of the investor plays an important role in the choice of decision-making technique used. The younger investors, who earn the lowest returns were less likely to use industry analysis but more likely to use technical analysis and advocate’s recommendation. Specifically, the younger male investors were less likely to use industry analysis and more likely to use the advocate’s recommendation. The younger female investors were also less likely to use industry analysis. The middle-aged respondents, who earn the highest return were less likely to use technical analysis and advocate’s recommendation owing to lower means. Specifically, the middle-aged male investors were less likely to use the advocate’s recommendation and technical analysis. Then, middle-aged female investors were more likely to use industry analysis.

Originality/value

The findings would be beneficial for financial advisors and wealth managers to suggest age-appropriate strategies for the various investor groups. This age-based profiling of investors would make investors aware of their decision-making techniques and encourage them to make more rational decisions.

Details

Qualitative Research in Financial Markets, vol. 13 no. 1
Type: Research Article
ISSN: 1755-4179

Keywords

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