The Effect Of Investors’ Cognitive Bias On Stock Decision Making

Abstract

There have been many differences in the evolving process from the traditional economy to the behavioral economy. Conventional finance has made progress within the framework of rational choice and expected benefit asumptions. Behavioral finanse is based on expectation theory. In fact, it is based on the argument that individuals are not fully rational. Within the scope of irrational act of individuals, the ability to select stocks has been illusory. The point is that different ways of thinking ocur. It is seen that buyer and seller perspectives are opposite to each other with a complex thinking. In other words, when buyers buy stocks, the price is low and this may increase, and sellers think that the price is too high and may fall. In fact, it is a complex structure of how buyers and sellers in the markets are convinced that a certain price is uncertain. The aim of this study is to investigate the effect of decision-making process on investor emotional prejudices, whether the decision mechanisms are more effective when buying stocks in the market or the idea that people are competent to know more than the market.

Keywords

• Behavioral Finance,Decision Mechanisms

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