Selim Aren, Sibel Dinç Aydemir and Yasin Şehitoğlu
The purpose of this paper is to evaluate published institutional investor research focused on home bias, disposition effect, and herding behavior in recognized journals and to…
Abstract
Purpose
The purpose of this paper is to evaluate published institutional investor research focused on home bias, disposition effect, and herding behavior in recognized journals and to ascertain some substantial gaps with regard to them.
Design/methodology/approach
Recently published studies between 2005 and 2014, which intend to examine behavioral biases on institutional investors, have been reviewed through juxtaposing them under the three fundamental titles and figuring them according to the explanation why these biases occurs.
Findings
The research examining home bias has identified the presence of this effect on institutional investors and explained it with information or culture. Yet, the existence of disposition effect has not been found in the extant research. These studies have estimated disposition effect through overconfidence and experience. Also, extant studies have provided evidence of herding behavior, attributing this behavior to pursuing same published information and protecting their reputation and career.
Originality/value
Currently, no study, which reviews and evaluates the empirical research body on behavioral biases displayed institutional investors, exists. To the authors’ knowledge, this is the first paper which highlights the empirical evidence on these bias and summarizes the explanations in these studies for these biases exhibited by institutional investors. This could contribute to the researchers focusing on behavioral biases on institutional investors by providing them with a meaningful figuralization regarding their evidence and explanation.
Details
Keywords
Sibel Dinç Aydemir and Selim Aren
This study aims to examine the roles of individual factors on risky investment intention as an indicator of risky financial behavior.
Abstract
Purpose
This study aims to examine the roles of individual factors on risky investment intention as an indicator of risky financial behavior.
Design/methodology/approach
The data were collected from a survey instrument and composed of 496 individuals’ responses. The authors exploited structural equation modelling and multigroup structural equation modelling for direct and indirect effects, respectively.
Findings
Results indicate that emotional intelligence and locus of control have a positive impact on financial risk-taking, while risk aversion in general has the negative one. Although financial literacy does not have a direct effect on risky financial behavior, it has important role as a moderator variable, interacting with external locus of control.
Originality/value
The authors expect this study to contribute into behavioral finance literature in two ways. First, they investigate joint and relative effects of four major factors (i.e. emotional intelligence, locus of control, risk aversion in general and financial literacy) identified in the literature on financial risk-taking of individual investors. Each belongs to a different venue in an individual’s psyche and therefore is expected to influence financial risk-taking through different mechanisms. However, the research arguing their roles on the financial risky behavior directly is very limited. Investigating their individual effects is likely to provide unique insights into our understanding of risky financial behavior. Second, the authors also posit and manifest that the effects of the first three of the aforementioned factors on risk-taking intentions are moderated by financial literacy. This finding is likely to provide rather valuable insights pertaining to the emergence of risk-taking behaviors and may shed light on the root reasons behind equivocal findings in previous research regarding the effect of each factor.