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Reconsideration of behavioral biases in financial markets: comparison of the S&P500 index and TEPIX index of Tehran Stock Exchange

Author

Listed:
  • Saeid Tajdini

    (University of Tehran)

  • Ali Taiebnia

    (University of Tehran)

  • Mohsen Mehrara

    (University of Tehran)

Abstract

The purpose of this research is to reclassify behavioral biases in financial markets into two types of historical- and current-oriented ones. In this study, new models were developed for measuring the size of historical-oriented behavioral biases based on the random walk and current-oriented ones based on changes in the P/E ratio. Data for the TEPIX index of Tehran Stock Exchange and the S&P500 index from 05/14/2014 to 06/13/2021 showed that criteria developed for the historical- and current-oriented biases are, respectively, 71 and 15.8 times more for the TEPIX compared to S&P500. So, the results of this study imply that underdeveloped financial markets such as the Tehran Stock Exchange, suffer from large frictions and widespread inefficiencies that should be addressed by policy makers.

Suggested Citation

  • Saeid Tajdini & Ali Taiebnia & Mohsen Mehrara, 2023. "Reconsideration of behavioral biases in financial markets: comparison of the S&P500 index and TEPIX index of Tehran Stock Exchange," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 28(4), pages 705-711, December.
    • Handle: RePEc:pal:jofsma:v:28:y:2023:i:4:d:10.1057_s41264-022-00167-8
    DOI: 10.1057/s41264-022-00167-8
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    More about this item

    Keywords

    Current-oriented behavioral bias; Historical-oriented behavioral bias; Behavioral biases;
    All these keywords.

    JEL classification:

    • G40 - Financial Economics - - Behavioral Finance - - - General
    • 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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