The Effect Of Investors’ Cognitive Bias On Stock Decision Making

Year 2019, Volume: 1 Issue: 1, 13 - 21, 11.12.2019

Funda Civek

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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