IDEAS home Printed from https://ideas.repec.org/a/jfr/ijfr11/v10y2019i4p68-83.html
   My bibliography  Save this article

Does Availability Bias Have Influence on FMCG Investors? An Empirical Study on Cognitive Dissonance, Rational Behaviour and Mental Accounting Bias

Author

Listed:
  • Shantha Gowri B
  • Vedantam Seetha Ram

Abstract

Investors usually rely on the first-hand information to take their investment decisions. Investors are prone to many types of heuristics and bias which can lead to indecisive situations or irrational behavior and affect their performance. Indecisive state of mind of investors is attributed due to cognitive dissonance as it differs from their belief and the facts they come in reality. Mental accounting has its own advantages of meeting the investor¡¯s goal on time and allocating resources effectively to achieve each of their investment objectives, on the contrary it can also lead to poor portfolio management and performance. The current study is conducted in order to understand the influence of availability heuristic influence on cognitive dissonance and rational behavior through mental accounting bias as a mediating factor exclusively on Fast Moving Consumer Goods (FMCG) investor¡¯s decision making in stock market. Data was collected by purposive sampling method using self-administered questionnaire from 614 FMCG investors through 15 stock broking firms registered in Hyderabad city, tools like correlation, analysis of variance, Cronbach Alpha test, linear regression and mediation are used for data analysis. The results reveal that availability bias, cognitive dissonance and rational behavior are highly correlated to one another. Availability bias influence on cognitive dissonance and rational behavior of FMCG investors through mental accounting bias is negligible. Though many studies have accepted the major role played by mental accounting bias and few against it in our study it is proved to be negligible in case of defensive sectors of FMCG investors.

Suggested Citation

  • Shantha Gowri B & Vedantam Seetha Ram, 2019. "Does Availability Bias Have Influence on FMCG Investors? An Empirical Study on Cognitive Dissonance, Rational Behaviour and Mental Accounting Bias," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(4), pages 68-83, July.
    • Handle: RePEc:jfr:ijfr11:v:10:y:2019:i:4:p:68-83
    DOI: 10.5430/ijfr.v10n4p68
    as

    Download full text from publisher

    File URL: http://www.sciedu.ca/journal/index.php/ijfr/article/view/15593/9831
    Download Restriction: no
    File URL: http://www.sciedu.ca/journal/index.php/ijfr/article/view/15593
    Download Restriction: no
    File URL: https://libkey.io/10.5430/ijfr.v10n4p68?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Barberis, Nicholas & Thaler, Richard, 2003. "A survey of behavioral finance," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 18, pages 1053-1128, Elsevier.
    2. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
    3. Lucy F. Ackert & Bryan K. Church & Richard Deaves, 2003. "Emotion and financial markets," Economic Review, Federal Reserve Bank of Atlanta, vol. 88(Q2), pages 33-41.
    4. Massimo Massa & Andrei Simonov, 2005. "Behavioral Biases and Investment," Review of Finance, Springer, vol. 9(4), pages 483-507, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dash, Saumya Ranjan & Maitra, Debasish, 2018. "Does sentiment matter for stock returns? Evidence from Indian stock market using wavelet approach," Finance Research Letters, Elsevier, vol. 26(C), pages 32-39.
    2. Florian Meier, 2020. "The Age of Cheap Money and Passive Investing: Are Pro Forma Earnings Value Relevant?," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 9(2), pages 1-1.
    3. Glaser, Markus, 2003. "Online Broker Investors: Demographic Information, Investment Strategy, Portfolio Positions, and Trading Activity," Sonderforschungsbereich 504 Publications 03-18, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    4. Mathias Drehmann & Jörg Oechssler & Andreas Roider, 2005. "Herding and Contrarian Behavior in Financial Markets: An Internet Experiment," American Economic Review, American Economic Association, vol. 95(5), pages 1403-1426, December.
    5. Kylie J. Gilbey & Sharon Purchase, 2023. "Segmented financial risk tolerances within the standardised initial public offering regulatory environment of the Australian Securities Exchange," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1447-1475, April.
    6. Jianping Mei & Jose A. Scheinkman & Wei Xiong, 2009. "Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia," Annals of Economics and Finance, Society for AEF, vol. 10(2), pages 225-255, November.
    7. Oberlechner, Thomas & Osler, Carol, 2012. "Survival of Overconfidence in Currency Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(1), pages 91-113, February.
    8. Bastian Schulz, 2023. "Behavioral Finance and how its Behavioral Biases Affect German Investors," ACTA VSFS, University of Finance and Administration, vol. 17(1), pages 39-59.
    9. Li, Fengfei & Lin, Ji-Chai & Lin, Tse-Chun & Shang, Longfei, 2023. "Behavioral bias, distorted stock prices, and stock splits," Journal of Banking & Finance, Elsevier, vol. 154(C).
    10. Lin, Xiaoji & Zhang, Lu, 2013. "The investment manifesto," Journal of Monetary Economics, Elsevier, vol. 60(3), pages 351-366.
    11. Frankel, Jeffrey & Saiki, Ayako, 2016. "Does It Matter If Statistical Agencies Frame the Month's CPI Report on a 1-Month or 12-Month Basis?," Working Paper Series 16-011, Harvard University, John F. Kennedy School of Government.
    12. Patrick Bolton & José Scheinkman & Wei Xiong, 2006. "Executive Compensation and Short-Termist Behaviour in Speculative Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(3), pages 577-610.
    13. Paul-Olivier KLEIN & Rima TURK & Laurent WEILL, 2017. "How Religiosity Shapes Investor Behavior: Sukuk Issuances During Ramadan," Working Papers of LaRGE Research Center 2017-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    14. Véronique Bessière, 2007. "Excès de confiance des dirigeants et décisions financières:une synthèse," Revue Finance Contrôle Stratégie, revues.org, vol. 10(1), pages 39-66, March.
    15. Glaser, Markus, 2003. "Online broker investors : demographic information, investment strategy, portfolio positions, and trading activity," Papers 03-18, Sonderforschungsbreich 504.
    16. Ding, Rong & Cheng, Peng, 2011. "Speculative trading, price pressure and overvaluation," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(3), pages 419-442, July.
    17. Andrew Hertzberg, 2018. "A Theory of Disclosure in Speculative Markets," Management Science, INFORMS, vol. 64(12), pages 5787-5806, December.
    18. Thomas Oberlechner & Carol Osler, 2009. "Overconfidence in Currency Markets," Working Papers 02, Brandeis University, Department of Economics and International Business School.
    19. Nuzula, Nila Firdausi & Sisbintari, Ika & Suhadak, & Handayani, Siti Ragil, 2019. "The use of technical analysis, source of information and emotion and its influence on investment decisions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 51-56.
    20. David Hirshleife, 2015. "Behavioral Finance," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 133-159, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jfr:ijfr11:v:10:y:2019:i:4:p:68-83. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gina Perry (email available below). General contact details of provider: http://ijfr.sciedupress.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.