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Behavioural finance: the decoy effect on stock investment decisions

Author

Listed:
  • Bruno Uekane Okumura
  • Tabajara Pimenta Júnior
  • Márcia Mitie Durante Maemura
  • Luiz Eduardo Gaio
  • Rafael Confetti Gatsios

Abstract

Purpose - This study aims to investigate the occurrence of the decoy effect in stock investment decisions based on fundamental analysis. Design/methodology/approach - In this study, the decoy effect was investigated by applying two questionnaires, one of them with the presence of a decoy alternative, to a set of 224 respondents with knowledge of business fundamentals, simulating investment decisions in stocks of companies listed on the Brazilian Stock Exchange. The data analysis was performed using the Fisher's exact test, Student'st-test and ANOVA. The research also aimed to detect a potential relationship between the variables gender, age, degree and professional experience with the type of decision made. Findings - The results pointed to the occurrence of the decoy effect when analysing the general response data. However, such evidence was not confirmed when the sample was analysed by classes (gender, course, age and professional experience). There is no statistical evidence that the decoy effect influences classes. Originality/value - The recent decoy effect literature is little explored in investment decision-making. This study is unique in examining the decoy effect in investment decisions in the Brazilian context.

Suggested Citation

  • Bruno Uekane Okumura & Tabajara Pimenta Júnior & Márcia Mitie Durante Maemura & Luiz Eduardo Gaio & Rafael Confetti Gatsios, 2023. "Behavioural finance: the decoy effect on stock investment decisions," Journal of Economics, Finance and Administrative Science, Emerald Group Publishing Limited, vol. 28(56), pages 335-351, November.
    • Handle: RePEc:eme:jefasp:jefas-01-2022-0007
    DOI: 10.1108/JEFAS-01-2022-0007
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    More about this item

    Keywords

    Behavioural finance; Decoy effect; Investment decisions; D91; G11; G41;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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