Behavioral Factors Influencing Making Investment Decisions On The Stock Market

Student: Lisina Dar`ya

Educational Programme: Bachelor

Year of Graduation: 2014

The topic of this research is "Behavioral Factors Influencing Making Investment Decisions On The Stock Market". It discusses the main differences between the traditional theory of behaviorism (neoclassical financial theory) and highlights the main areas of application of the behavioral approach in the field of corporate finance. In the theoretical part the behavioral effects, background capital markets and the so-called behavioral abnormalities individuals are researched. Relevance of the research topic due to the fact that currently there are a number of concepts of behavioral analysis and modeling of financial markets, however, they account for only a partial way the psychological aspects of decision-making.The study examines five well-documented behavioral factors: the disposition effect, herd behavior, availability heuristic, gambler’s fallacy and hot hand fallacy  influencing investment decisions in the Russian cross-section of market investors.  The paper is intended to better reflect the way stock investors think and behave by using Behavioral Finance theory. The research uses online survey, and news analysis of the dynamics of stock price "Lukoil" with commentary in behavioral context. First, the experiment was conducted among a group of bachelors and masters (71 persons) of financial management  from HSE Research University, they were asked to fill out a short questionnaire. Second, it was conducted online surveys via one of the leading financial websites in Russia – ForexSystems.ru when real investors are chatting. This portal is widely recognized for being regularly visited by market investors, not necessarily professional.The study showed the importance of the practical application of the model on the basis of information of the Russian stock market and high predictive power for the behavior of investors in the oil sector companies in the Russian stock market.

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