Behavioral Finance as a Human Dimension of Finance in the Context of Cognitive Bias and Heuristics: A Literature Review and Compilation Study

Year 2018, , 131 - 156, 24.12.2018

Bilgehan Tekin

https://doi.org/10.35235/uicd.462794

Cited By: 3

Abstract

There are two
basic assumptions of traditional finance theory. These are individuals are
rational and aim to maximize their benefits in accordance with the assumptions
of expected utility theory. Rational decision making under uncertainty that is
the work done for the first time by Savage (1954) requires that individuals
give probabilities to possible outcomes of events and harmonize the means to
assess these outcomes. However, as can be seen in the traditional theories, the
process of conducting such estimations and decision making processes that can
cause serious negativity is an important issue that cannot be reduced to pure
mathematical models. At this point, the human nature factor must be taken into
account. The biases and the preferences that go beyond the standards in the
field of psychology have been applied to investor behavior by the behavioral
finance field. The example of deviation from full rationality was revealed by
Simon (1957), which suggested bounded rationality. Bounded rationality assumes
that some cognitive limitations or costs of information collection prevent
decision-makers from making the most appropriate decisions. As the physical and
social world is too complex to be predicted, it becomes more difficult to make
decisions about the future and uncertainty. For this reason, individuals often
tend to look for ways to make decisions easily and effortlessly. According to
the biases and heuristics approach, people use cognitive shortcuts that are
open to false assessments while making probability assessments. In this study,
behavioral finance discipline, cognitive prejudices and crescents are discussed
and studies on the subject are discussed. This study is a literature review and
compilation study.ngilizce 

Keywords

Cognitive Biases, Heuristics, Behavioral Finance, Behavioral Corporate Finance, Financial Decisions

Bilişsel Önyargı ve Hevristik Bağlamında Finansın İnsani Boyutu Olarak “Davranışsal Finans”: Bir Literatür İncelemesi ve Derleme Çalışması

Abstract

Geleneksel
finans teorisinin iki temel varsayımı söz konusudur. Bunlar, bireylerin
rasyonel oldukları ve beklenen fayda teorisinin varsayımlarına uygun olarak
faydalarını maksimize etme amacı taşıdıklarıdır. İlk kez Savage (1954)
tarafından yapılan çalışma ile gündeme gelmiş olan belirsizlik altında rasyonel
karar verme, bireylerin olayların gerçekleşme olasılıklarını tahmin etmesini ve
bu sonuçları değerlendirme araçlarını uyumlu hale getirmesini gerektirmektedir.
Bununla birlikte geleneksel teorilerde görüldüğü gibi sonuçları açısından ciddi
olumsuzluklara neden olabilecek türden tahminleri yürütme ve karar alma
süreçleri saf matematiksel modellemelere indirgenemeyecek kadar önemli bir
meseledir. Bu noktada insan doğasının da hesaba katılması gerekmektedir.
Psikoloji alanındaki çalışmalar sonucu ortaya konmuş önyargılar ve
standartların dışına çıkan tercihler davranışsal finans alanı tarafından
yatırımcı davranışlarına uygulamıştır. Tam rasyonellikten sapmanın örneği ise
Simon (1957) tarafından sınırlı rasyonellik önermesi ile ortaya konmuştur.
Sınırlı rasyonellik, bazı bilişsel engellerin veya bilgi toplama
maliyetlerinin, karar vericilerinin tam olarak en uygun kararları vermesini
önlediğini varsayar. Fiziksel ve sosyal dünya tahminlenemeyecek kadar karmaşık
unsurlar barındırdığından gelecekle ilgili ve belirsizlik içeren kararları
almak daha fazla zorlaşmaktadır. Bu nedenle bireyler genellikle alacakları
kararları çaba göstermeden ve kolaylıkla almanın yollarını arama eğilimi
gösterirler. Hevristik ve önyargı yaklaşımına göre insanlar olasılık
değerlendirmeleri yaparken hatalı değerlendirmelere açık bilişsel kısayollar
kullanılar. Bu çalışmada davranışsal finans disiplini, bilişsel önyargılar ve
hevristikler bağlamında ele alınmış ve konu ile ilgili yapılan çalışmalar
üzerinde durulmuştur. Bu çalışma bir literatür incelemesi ve derleme çalışması
mahiyetindedir.

Keywords

Bilişsel Önyargılar, Hevristikler, Davranışsal Finans, Davranışsal Kurumsal Finans, Finansal Kararlar

References

• Abelson, R. P. ve Levi, A. (1985). Decision making and decision theory. Handbook of social psychology, 1, 231-309.
• Atkinson, R.E.E. Smith, D.J. Bem ve S.N. Hoeksemaç. (1996). Psikolojiye giriş (Çev.: Yavuz Alogan) 12. Edition, USA.
• Baker, H. K. ve Nofsinger, J. R. (Eds.). (2010). Behavioral finance: investors, corporations, and markets(Vol. 6). John Wiley & Sons.
• Baker, M. ve Wurgler, J. (2006). Investor sentiment and the cross‐section of stock returns. The Journal of Finance, 61(4), 1645-1680.
• Baker, M. ve Wurgler, J. (2011). Behavioral corporate finance: An updated survey (No. w17333).
• National Bureau of Economic Research.http://www.nber.org/papers/w17333.pdf
• Baker, M., Ruback, R. ve Wurgler, J. (2004). Behavioral corporate finance: A survey. In The Handbook of Corporate Finance: Empirical Corporate Finance, Espen Eckbo (Ed.). New York: Elsevier/North Holland.http://down.cenet.org.cn/upfile/10/2008725123226110.pdf#page=172
• Baltaş, Z., (2011), Karar vermenin psikolojisi, Kaynak Dergisi, Sayı 46, Nisan-Haziran.
• Barak, O. (2008). İMKB’de aşırı reaksiyon anomalisi ve davranışsal finans modelleri kapsamında değerlendirilmesi. İktisadi ve İdari Bilimler Fakültesi Dergisi, 10(1), 1-24.
• Barberis, N. ve Huang, M. (2001). Mental accounting, loss aversion, and individual stock returns. The Journal of Finance, 56(4), 1247-1292.
• Barberis, N. ve Thaler, R. (2003). A survey of behavioral finance. Handbook of the Economics of Finance, Volume 1, Part B, Pages 1053–1128.
• Barberis, N., Huang, M. ve Santos, T. (2001). Prospect theory and asset prices. The Quarterly Journal of Economics, 116(1), 1-53.
• Benartzi, S. ve Thaler. R. (1995). Myopic loss aversion and the equity premium puzzle. Quarterly Journal of Economics. 110: 1, pp. 73-9
• Ben-David, I., Graham, J. R. ve Harvey, C. R. (2007). Managerial overconfidence and corporate policies (No. w13711). National Bureau of Economic Research.http://www.nber.org/papers/w13711.pdf Ben-David, I., Graham, J. R. ve Harvey, C. R. (2010). Managerial miscalibration (No. w16215). National Bureau of Economic Research.https://faculty.fuqua.duke.edu/~charvey/Research/Working_Papers/W105_Managerial_miscalibration.pdf
• Black, F. (1986). Noise. The Journal of Finance, 41(3), 529-543.
• Buchanan, D. ve Huczynski, A. (2004). Organizational behaviour. An Introductory Text. FT Prentice Hall, 441.
• Camerer, C. F. ve Malmendier, U. (2004). Behavioral organizational economics. Behavioral Economics and Its Applications, Princeton University Press, Princeton and Oxford.http://eml.berkeley.edu/~ulrike/Papers/BEO_chap7.pdf (Erişim:11/04/2015)
• Camerer, C. F.,& Malmendier, U. (2007). Behavioral organizational economics. Behavioral Economics and Its Applications, Princeton University Press, Princeton and Oxford.
• Camerer, C. ve Loewenstein, G. (2004). Behavioral economics: Past, present, future. Princeton: Princeton University Press
• Carpenter, M. A. ve Weikel, M. K. (Eds.). (2011). The handbook of research on top management teams. Edward Elgar Publishing.
• Cordeiro, L., (2009) Managerial overconfidence and dividend policy, Available at SSRN:http://ssrn.com/abstract=1343805orhttp://dx.doi.org/10.2139/ssrn.1343805
• Cornicello, G. (2004), Beheavioural finance and speculative bubble, Doctoral dissertation, University of Bocconi
• Daniel, K., Hirshleifer, D. ve Teoh, S. H. (2002). Investor psychology in capital markets: Evidence and policy implications. Journal of monetary economics, 49(1), 139-209.
• Datta, S., Iskandar-Datta, M. ve Raman, K. (2003). Value creation in corporate asset sales: The role of managerial performance and lender monitoring. Journal of Banking & Finance, 27(2), 351-375.
• Selody, K. (2010). Board independence and the gender pay gap for top executives (CRI 2010-013). Retrieved [insert date] from Cornell University, ILR School, Compensation Research Initiative site: http://digitalcommons.ilr.cornell.edu/cri/16
• De Bondt, W. F. ve Thaler, R. (1985). Does the stock market overreact?. The Journal of finance, 40(3), 793-805.
• De Long, J. B., Shleifer, A., Summers, L. H. ve Waldmann, R. J. (1990). Noise trader risk in financial markets. Journal of political Economy, 703-738.
• DeLong, J. Bradford, Andrei Shleifer, Lawrence H. Summers ve Robert J. Waldmann, 1990, Positive feedback investment strategies and destabilizing rational speculation, Journal of Finance 45, 379-395.
• Deshmukh, S., Goel, A. M. ve Howe, K. M. (2010). CEO overconfidence and dividend policy. Available at SSRN: http://ssrn.com/abstract=1496404 or http://dx.doi.org/10.2139/ssrn.1496404 Dow, J. ve G. Gorton, 1994, Arbitrage chains, Journal of Finance 49, 819-849.
• Döm, S. (2003), Yatırımcı Psikolojisi, İstanbul: Değişim Yayınları.
• Fairchild, R. (2010). Behavioural corporate finance: existing research and future directions. International Journal of Behavioural Accounting and Finance, 1(4), 277-293.
• Frankfurter, G. M. ve McGoun, E. G. (2000). Market efficiency or behavioral finance: The nature of the debate. The Journal of Psychology and Financial Markets, 1(3-4), 200-210.
• Fuller, R. J. (1998). Behavioral finance and the sources of alpha. Journal of Pension Plan Investing, 2(3), 291-293.
• Fuller, R.J. (2000), Behavioral finance and the sources of alpha. Working Paper.
• Gazel, S., (2014), Davranışsal finans (psikolojik eşik ve önyargılar), Ankara: Detay Yayıncılık.
• Gilovich, T., Griffin, D. ve Kahneman, D. (2002). Heuristics and biases: The psychology of intuitive judgment. Cambridge University Press.
• Glaser, M., Nöth, M., & Weber, M. (2003). Behavioral finance. Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung, 3., https://ub-madoc.bib.uni-mannheim.de/2770/1/dp03_14.pdf
• Graham, J. R., Harvey, C. R. ve Puri, M. (2013). Managerial attitudes and corporate actions. Journal of Financial Economics, 109(1), 103-121.
• Haley, U. C. ve Stumpf, S. A. (1989). Cognıtıve traıls ın strategıc decısıon‐makıng: lınkıng theorıes of personalıtıes and cognıtıons. Journal of Management Studies, 26(5), 477-497.
• Haselton, M. G., Nettle, D. ve Andrews, P. W. (2005). The evolution of cognitive bias. The handbook of evolutionary psychology, 724-746.
• Heaton, J. B. (2002). Managerial optimism and corporate finance. Financial management, 31(2), 33-45.
• Hirshleıfer, D. (2001). Investor psychology and asset pricing. The Journal of Finance, 56(4), 1533-1597.
• Hirshleıfer, David, Siew Hong Teoh ve Angie Low, (2010), Are overconfident CEOs better innovators? . Working paper, University of California, Irvine.
• Jurevičienė, D. Ve Ivanova, O. (2013). Behavioural Finance: Theory and Survey. Science–Future of Lithuania/Mokslas–Lietuvos Ateitis, 5(1), 53-58.
• Kahneman, D. (1992). Reference points, anchors, norms, and mixed feelings. Organizational Behavior and Human Decision Processes, 51(2), 296-312.
• Kahneman, D. (2003). Maps of bounded rationality: Psychology for behavioral economics. American economic review, 1449-1475.
• Kahneman, D. Ve Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica: Journal of the Econometric Society, 263-291.
• Kahneman, D. ve Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica: Journal of the Econometric Society, 263-291.
• Kahneman, D. Ve Tversky, A. (1984). Choices, values, and frames. American psychologist, 39(4), 341.
• Kahneman, D., & Egan, P. (2011). Thinking, fast and slow (Vol. 1). New York: Farrar, Straus and Giroux.
• Kahneman, D., & Tversky, A. (1972). Subjective probability: A judgment of representativeness. In The Concept of Probability in Psychological Experiments (pp. 25-48). Springer, Dordrecht.
• Kahneman, D., & Tversky, A. (1973). On the psychology of prediction. Psychological Review, 80(4), 237- 251.
• Kahneman, D., & Tversky, A. (1982). The psychology of preferences. Scientific American, 246(1), 160- 173.
• Kanheman, D., Slovic, P. ve Tversky, A. (1982). Judgement under uncertainty: Heuristics and biases. Cambridge University Press, Cambridge, UK.
• Kanheman, D., Slovic, P. ve Tversky, A. (1982). Judgement under uncertainty: Heuristics and biases. Cambridge University Press, Cambridge, UK.
• Karan, B. (2001). Yatırım analizi ve portföy yönetimi, Ankara: Gazi Kitabevi.
• Kardes, F., Cronley, M. ve Cline, T. (2014). Consumer behavior. Cengage Learning.
• Lai, L. (2011), Behavioral biases in corporate financial decision making, Bachelor Thesis Finance, Tilburg University, International Business.
• Malmendier, U. ve Tate, G. (2008). Who makes acquisitions? CEO overconfidence and the market's reaction. Journal of financial Economics, 89(1), 20-43.
• Malmendier, U. ve Zheng, H. (2012). Managerial duties and managerial biases. University of California at Berkeley Working Paper.
• Malmendier, U., Tate, G. ve Yan, J. (2011). Overconfidence and early‐life experiences: the effect of managerial traits on corporate financial policies. The Journal of finance, 66(5), 1687-1733.
• Mcmahon, R. G. P., (2006). Behavioural finance, Enrepreneurial Cognition and SME Financial Management, Working Paper Number: 06-3, School of Commerce, Flinders University.
• Miller, M. H. (1986). Behavioral rationality in finance: The case of dividends. Journal of Business, S451- S468
• Nisbett, R.Ve Ross L., (1980), Human inference: Strategies and shortcomings of social judgment, Engle- wood Cliffs, NJ: Prentice-Hall.
• Nofsinger, J. R. (2011). The psychology of investing. 4. Baskı, New Jersey: Prentice Hall.
• Özerol, H. (2011), Davranışsal finans: Bireysel yatırımcıların nasıl davranacakları belli olmaz, Elma yayınevi.
• Park, H. ve Sohn, W. (2013). Behavioral finance: A survey of the literature and recent development. Seoul Journal of Business, 19(1), 3.
• Payne, J. W., Bettman, J. R. ve Johnson, E. J. (1988). Adaptive strategy selection in decision making. Journal of Experimental Psychology: Learning, Memory, and Cognition, 14(3), 534.
• Payne, J. W., Bettman, J. R. ve Johnson, E. J. (1992). Behavioral decision research: A constructive processing perspective. Annual Review of Psychology, 43(1), 87-131.
• Pimenta, A. ve Fama, R. (2014). Behavioral finance: a bibliometric mapping of academic publications in usa since 1993. Available at SSRN 2406763.
• Pitz, G. F. ve Sachs, N. J. (1984). Judgment and decision: Theory and application. Annual Review of Psychology, 35(1), 139-164.
• Ricciardi, V. ve Simon, H. K. (2000). What is behavioral finance?. Business, Education & Technology Journal, 2(2), 1-9.
• Ritter, J. R. (2003). Behavioral finance. Pacific-Basin Finance Journal, 11(4), 429-437.
• Rockenbach, B. (2004). The behavioral relevance of mental accounting for the pricing of financial options. Journal of economic behavior & organization, 53(4), 513-527.
• Savage, L.J. (1954), The foundations of statistics. New York: John Wiley.
• Schwenk, C. R. (1988). The cognitive perspective on strategic decision making. Journal of management studies, 25(1), 41-55.
• Sefil, S. ve Çilingiroğlu, H., K., (2011), Davranışsal finansın temelleri: Karar vermenin bilişsel ve duygusal eğilimleri, İstanbul Ticaret Üniversitesi Sosyal Bilimler Dergisi, 10 (19), 247-268.
• Sewell, M., (2010), Behavioural finance, Available online at: http://www. behaviouralfinance.net/behavioural-finance.pdf
• Shafer, G. (1986). Savage revisited. Statistical science, 1(4), 463-485.
• Shefrin, H. (1999). Irrational exuberance and option smiles. Financial Analysts Journal, 91-103.
• Shefrin, H. (2000). Beyond greed and fear: Understanding behavioral finance and the psychology of investing. Oxford University Press.
• Shefrin, H. (2001). Behavioral corporate finance. Journal of Applied Corporate Finance, 14(3).
• Shefrin, H. (2007, June). Behavioral finance: biases, Ortalama-variance returns, and risk premiums. In CFA Institute Conference Proceedings Quarterly, 24(2), 4-12.
• Shiller, R. J. (2003). From efficient markets theory to behavioral finance. Journal of economic perspectives, 83-104.
• Shleifer, A. ve Vishny, R. W. (1997). The limits of arbitrage. The Journal of Finance, 52(1), 35-55.
• Simon, H. A. (1955). A behavioral model of rational choice. The Quarterly Journal of Economics, 99-118.
• Simon, H. A. (1957). Models of man; social and rational. Oxford, England: Wiley.
• Simon, H. A. (1979). Rational decision making in business organizations. The American economic review, 493-513.
• Statman, M. (1999). Behaviorial finance: Past battles and future engagements. Financial Analysts Journal, 55(6), 18-27.
• Stevenson, M. K., Busemeyer, J. R. ve Naylor, J. C. (1990). Judgment and decisionmaking theory. ln MD Dunnette & LM Hough (Eds.), Handbook ofindustrial and organizational psychology (Vol. 1, pp. 283-374). Palo Alto, California: Con» suiting Psychologists Press.
• Tanör, R. (1999). Türk Sermaye Piyasası, 1. Cilt (Taraflar).
• Thaler, R. (1985). Mental accounting and consumer choice. Marketing Science, 4(3), 199-214.
• Thaler, R. H. (1999). Mental accounting matters. Journal of Behavioral Decision Making, 12(3), 183-206.
• Tversky, A. Ve Kahneman, D. (1973). Availability: A heuristic for judging Frekans (Sıklık) and probability. Cognitive Psychology, 5(2), 207-232.
• Tversky, A. ve Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124-1131.
• Tversky, A. ve Kahneman, D. (1992). Advances in prospect theory: Kümülatif representation of uncertainty. Journal of Risk and Uncertainty, 5(4), 2
• Tversky, A., & Kahneman, D. (1971). Belief in the law of small numbers. Psychological Bulletin, 76(2), 105-110.
• Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science, 211(4481), 453-458.
• Tversky, A., & Kahneman, D. (1983). Extensional versus intuitive reasoning: The conjunction fallacy in probability judgment. Psychological Review, 90(4), 293-315.
• Ünal, T., (1995), Gelişmekte olan piyasalar ve kurumsal yatırımcılar, İMKB Yayınları, No:7, İstanbul.
• Von Neumann, J., & Morgenstern, O. (1947). Theory of games and economic behavior, 2nd rev.
• Vrabel, D., (2015), Behavioral biases and their impact on corporate finance: Overview of literature and implications forvaluation, corporate governance and corporate strategy, Master Thesis, HEC Paris, MSc International Business CEMS.
• Wilke A. and Mata R. (2012) Cognitive Bias. In: V.S. Ramachandran (ed.) The Encyclopedia of Human Behavior, vol. 1, pp. 531-535. Academic Press.