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The impact of heuristics on investment decision and performance: Exploring multiple mediation mechanisms

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  • Abdin, Syed Zain ul
  • Farooq, Omer
  • Sultana, Naheed
  • Farooq, Mariam

Abstract

Previous studies have examined the impact of heuristics on the investment performance of individuals. This paper examines mediated links through fundamental and technical stock market anomalies. Findings rely on data collected through surveys of 324 investors. The results show that one mechanism, fundamental anomalies mediate the heuristics–investment performance link, and technical anomalies are not significant mediators of impact on investment performance of individuals. Of four heuristics components, Availability and representativeness is the strongest predictor of investment performance, followed by fundamental anomalies. Overconfidence is also a positive predictor of investment performance of individuals followed by fundamental anomalies.

Suggested Citation

  • Abdin, Syed Zain ul & Farooq, Omer & Sultana, Naheed & Farooq, Mariam, 2017. "The impact of heuristics on investment decision and performance: Exploring multiple mediation mechanisms," Research in International Business and Finance, Elsevier, vol. 42(C), pages 674-688.
    • Handle: RePEc:eee:riibaf:v:42:y:2017:i:c:p:674-688
    DOI: 10.1016/j.ribaf.2017.07.010
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    2. Kaleem Ullah Malik & Muhammad Shaukat Malik & Muhammad Irfan & Hussain Mehdi, 2022. "The Role of Heuristic Factors in Investment Performance: Exploring the Market Anomalies in a Volatile Environment," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 41(73), pages 63-84, February.
    3. Geetika Madaan & Sanjeet Singh, 2019. "An Analysis of Behavioral Biases in Investment Decision-Making," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(4), pages 55-67, July.
    4. Jennifer Kunz & Lara Sonnenholzner, 2023. "Managerial overconfidence: promoter of or obstacle to organizational resilience?," Review of Managerial Science, Springer, vol. 17(1), pages 67-128, January.
    5. Yen-Sheng Lee, 2022. "Representative Bias and Pairs Trade: Evidence From S&P 500 and Russell 2000 Indexes," SAGE Open, , vol. 12(3), pages 21582440221, August.

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