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The cognitive biases exhibited by investors could hinder their capacity for logical reasoning and impact their perception and reaction to information when making financial choices. So, this study was done to identify the behavioral biases that hinder investors' sound decision-making at the Pakistan Stock Exchange (PSX).

A cross-sectional study was undertaken employing a causal research design approach. Questionnaires were administered to individual investors of the PSX as the data collection methodology. The data were subsequently analyzed through the utilization of the Smart PLS Structural Equation Modeling (SEM) technique.

The results suggest that information factors and cognitive biases, namely home bias, geographical bias, investor sentiment, salience, and over/under reaction have a positive association with the investors' choices at PSX.

The study’s emphasis is on the impact of behavioral biases on individual investors only, even though such biases also influence the investment decisions of institutional investors.

The study holds implications for scholars engaged in the field of behavioral finance as well as professionals involved in the stock market, particularly those interacting with individual investors and personal finance. Additionally, the current study will take into account investors, financial advisors, practitioners, policymakers, investment experts, stakeholders or target groups, etc. to support various groups in their professional activity and to help them overcome such biases that influence their sound decision-making power.

The innovative aspect of this research is its ability to advance the understanding of the conceptual underpinnings and social structure of behavioral biases by critically analyzing the body of prior research and adding value to the existing body of literature on behavioral finance in Pakistan by investigating the combined impact of never-studied variables, i.e. geographical bias and information variables, understudied behavioral variables, i.e. home bias and salience and studied variables, i.e. investor sentiment and over/under reaction on individual investor investment decisions at PSX.

The purpose of the study is to investigate, synthesize and critically evaluate empirical research findings on the behavioral traits of fund managers from 1994 to 2024. The ultimate goal is to provide a unified body of literature on three broad topics: first, fund managers' demographic and professional characteristics, such as age, gender, level of education and years of industry experience; second, fund managers' social and political connections; and third, fund managers' behavioral biases that lead to irrational investment decisions.

The relevant papers from selected journals were discovered and manually validated using the Scopus database. From 317 retrieved documents, 57 relevant articles were chosen and analyzed after the forward and backward search of the existing articles.

This paper presents a categorized summary of behavioral factors that have gained a foothold in influencing the behavior of fund managers in fund management research, with several studies demonstrating their significance leading to improved prediction and model precision, as this review indicates. In addition, the study summarized the contributions of prior empirical studies within the aforementioned three major categories and illustrated their consequences.

The present study contributes to the understanding of the effects of behavioral finance theories on fund managers by providing meaningful explanations of their behavioral traits based on empirical evidence and existing trends and knowledge gaps, both of which can influence the future direction of research.

Many companies struggle with the assessment of customer experience. This chapter aims to demonstrate how mobile ethnography tackles this issue by assessing data in a holistical way, in-situ, and in real-time.

The chapter describes the implementation of a mobile ethnography project in a tourist destination, including participant recruitment, data collection, data analysis, and the derivation of insights.

The mobile ethnography project allowed to gain deep insights into the customers’ journeys.

Future research will need to further investigate questions of participant recruitment, the effectiveness of incentives as well as the performance of the data collection process. Furthermore the findings of this case need to be replicated in the context of other industries, as well as in other cultural contexts.

Mobile ethnography allows companies to gain more information on customer experience in real-time, thus with reduced cognitive and emotional bias. Therefore, the method can help to improve the touristic service offering and, consequently, customer experience.

As companies are searching for new approaches to research and manage customer experience, this chapter is of high value for both academia and practice.

Prior studies have found that managers adjust operational activities to tackle climate risk. However, the effects of climate risk on accounting practices are largely ignored in the literature. This paper investigates whether and how climate risk influences managers’ decision-making on the level of accounting conservatism and explains the results based on two competing channels: valuation demand and contracting demand.

Using firm level climate risk measures, we build a modified Basu (1997) model to conduct our econometric tests. In the baseline model, we use earnings before extraordinary items as the dependent variable, referred to as the earnings model. We control for different levels of fixed effect to identify the shocks of climate risk and mitigate potential concerns on endogeneity and bias in the model. A series of robustness tests provide supporting evidence for our baseline results and our explanation.

Using a sample of 35,832 firm-year observations on listed US firms over the period 2002 to 2019, we find that the perception of climate risk drives managers to choose the less conservative accounting policies. We conclude that the results are consistent with the valuation demand explanation but inconsistent with the contracting demand explanation.

The study provides additional evidence on how managers respond to climate risk by adjusting their corporate polices, specifically accounting policies. Our findings contradict the results of prior studies. We explain our results from a unique perspective. Overall, the study provides valuable insights for academics, investors, managers and policymakers.

The paper takes a behavioral approach by making use of the prospect theory to unveil the impact of salience on short-term and long-term investment decisions. This paper aims to investigate the group differences for two types of investors’ groups, i.e. individual investors and professional investors.

The study uses partial least square-based structural equation modeling technique, measurement invariance test and multigroup analysis test on a unique data set of 277 active equity traders which included professional money managers and individual investors.

Results showed that salience has a significant positive impact on both short-term and long-term investment decisions. The impact was almost 1.5 times higher for long-term investment decision as compared to short-term decision. Furthermore, multigroup analysis revealed that the two groups (individual investors and professional investors) were statistically significantly different from each other.

The study has implications for financial regulators, money managers and individual investors as it was found that individual investors suffer more with salience heuristic and may end up with sub-optimal portfolios due to inefficient diversification. Thus, investors should be cautious in fully relying on salience and avoid such bias to improve investment returns.

The study concludes with a discussion of policy and regulatory implications on how to minimize salience bias to achieve optimum and diversified portfolios.

The study has significantly contributed to the growing body of applied behavioral research in the discipline of finance.

This study proposes a framework based on salience theory and shows that focusing on one type of risk (idiosyncratic or systemic) can explain overpricing of securities ex ante, and resales at low prices during crisis periods.

The author consider an overlapping generations (OLG) model where each generation lives for two periods and there is no population growth. Agents (investors) start their lives with an endowment W > 0 and have mean-variance utility. They invest their endowment when young and consume when old. Each period, the young investors optimally choose their portfolio from different risky assets acquired from the old generation, all assumed to be in fixed supply.

The author show that investor salience bias can explain excess volatility of asset prices and the resulting fire-sales in periods of financial turmoil. A change in salience – from one component (idiosyncratic) to the other (systemic) – will generate excess volatility. Interestingly, higher risk aversion generally exacerbates the excess volatility of prices. Moreover, the model predicts that if a big systemic shock hits the financial system, due to salience bias the price of systemic assets falls sharply. This relates to the observed fire-sales of assets during the global financial crisis.

The proposed model and results suggest that there may be a scope for intervention in financial markets during turbulences. In terms of ex ante policies the study suggests that investors and regulator should use better risk assessment technologies.

This is the first study constructing a tractable model based on the argument that investor salience may exacerbate the excess volatility of prices during financial downturns. The author relate salience to two types of risk; idiosyncratic and systemic and assume that investors' risk perception is biased towards the type of risk that is currently salient based on prior beliefs or past data. The author show that the diversification fallacy of the precrisis period, where seemingly safe assets were overpriced, can be explained by agents overweighing idiosyncratic risk and ignoring systemic risk.

As the prioritization of family goals depends on the resolution of family conflict, this study's purpose is to explain how a dominant coalition (DC) of parental family members prioritizes their family economic and non-economic goals when faced with different types of family conflict.

A conceptual framework is developed drawing on a socio-cognitive approach to explain a family's goal formation process. This socio-cognitive approach extends the stakeholder salience underpinnings of family influence/essence theory. It shows that family conflict arises from the complex and novel social settings of a family business and that a DC prioritizes their family's goals by drawing on heuristic biases to resolve such family conflict.

A key finding of this study is the introduction of a distinct type of agency to family influence/essence research. Unlike the salient explanations, a family's goal formulation process is attributed to a DC's heuristic response in resolving their family business conflict.

Scholars have called for a greater need to investigate the social and cognitive underpinnings of a family's goal formation process. While the social settings of a family business are often explained in terms of family conflict, an understanding of the sources of such conflict and their resolution have received limited attention. This study opens new avenues to understanding the sources of such family conflict and the cognitive mechanisms needed to overcome them. This understanding is critical not only to the prioritization of a family's goals but also to the idea that “influence” defines the essence of a family business.

The purpose of this paper is to identify whether the Spanish stock market experiences a negativity effect on the announcement of Spanish consumer sentiment information and if firms that are signatory to the UN Global Compact on corporate social responsibility are relatively more salient in the minds of investors.

The authors use consumer sentiment announcements to show how the negativity effects on the Spanish stock market are significantly influenced by how salient the stock is in the minds of investors. If a firm’s stock exhibits negativity effects on the release of consumer sentiment information then this stock is salient to investors. If firms who are signatory to the UN Global Compact exhibit significant negativity effects, it could be concluded that these stocks are salient, particularly if firms that are not signatory to the Global Compact do not exhibit a similar negativity effect.

The IBEX35 index experiences significant negativity effects upon the release of Spanish consumer sentiment announcements. This is similar to that reported in other countries, notably Australia and the USA. Using the constituent firms in the IBEX35 index, the authors find that those firms that are signatory to the UN Global Compact are significantly more likely to experience negativity effects upon the release of Spanish consumer sentiment information than if they are not signatory to the Global Compact. This indicates that firms that are part of the UN Global Compact are more salient to investors.

Available published Spanish data on consumer sentiment.

Little is understood of the impact that consumer sentiment announcements have on stock prices. Studies in USA and Australia have identified significant negativity effects in stock markets when consumer sentiment information is released. This research has found that a psychological negativity bias occurs in firms that are salient to investors. Salience has been found to be important in asset pricing.

This paper tries to find out which companies are more likely to sign the UN Global Compact. These companies are more sensitive to consumer sentiment, because they depend on the everyday decisions of the consumers. The more the companies depend on consumers, the more they care about them. And, when the consumer sentiment goes down, they are more affected by this sentiment. These firms are also more worried about the long term. They are not only thinking about the profits in the short term but also about maintaining the generation of profits in the long term.

Based on a thorough review and synthesis of the literature in behavioral finance, the purpose of this paper is to develop three measures of heuristics that tend to influence investment decisions of individual investors.

Using perceptual data collected from a sample of 167 individual investors in the USA, the reliability and validity of heuristics measures are assessed by confirmatory factor analysis with structural equation modeling. Then, the second-order model is executed in order to indicate the paths among the study’s constructs. Finally, a multiple-group analysis is conducted to analyze the moderating effects of demographic factors on the relationship between the perceived level of heuristics and their constituent dimensions.

Of the three groups of heuristics, salience is found to be the most important followed by mental accounting, while representativeness features as relatively less important. Regarding the moderating effects, only investment experience is noted to have a significant moderating impact.

The data utilized for testing and validating this instrument was acquired from a relatively small sample of individual investors in the USA, which makes the generalization of findings somewhat limited.

Both researchers and practitioners in behavioral finance can use these measurement scales to better understand the impact of heuristics on individual investment decisions and also to develop models that relate the critical factors of heuristics to the performance of individual investment decisions.

To date, there has been no systematic attempt in the extant behavioral finance literature to develop a valid and reliable instrument on heuristics which would aid to improve the quality of decision making in investment analysis.

This study aims to examine the characteristics of financial analysts’ earnings forecasts after COVID-19 outbroke in the USA. Specifically, the authors examine how financial analysts tradeoff between accuracy and responsiveness under investors’ heightened information demand when there is market-wide uncertainty. In addition, the authors investigate how COVID-19 may affect analysts’ cognitive bias.

The research uses a sample of US-listed firms from March 2019 to February 2021, the period surrounding the COVID-19 outbreak in the USA.

The empirical analyses reveal that analysts issue timelier, more frequent, but less accurate forecasts after the COVID-19 outbreak, indicating that analysts become more responsive to investors’ intensified demand for information during the pandemic. Yet, the high uncertainty caused by COVID-19 increases forecasting difficulty. There is no systematic difference regarding the forecast accuracy between high- and low-ability analysts. Meanwhile, high-quality audit can improve forecast accuracy. Contrary to prior findings that analysts tend to underreact to bad news, the empirical evidence suggests that analysts, shaped by the salience bias, overestimate the negative impact of the pandemic. Analysts first issue pessimistic forecasts at the start of the outbreak and then revise forecasts upward steadily as the fiscal year-end approaches.

The study contributes to the literature by adding novel evidence on how COVID-19-induced uncertainty affects analyst forecast characteristics. It also provides additional evidence on how high-quality audit is associated with improved analyst forecast accuracy even under heightened uncertainty of COVID-19.