A research on investigation of factors affecting individual investors investing decisions with behavioral finance perspective

ABSTRACT The basis of this study is the failure of efficient market hypothesis in explaining market anomalies although this hypothesis assumes that all markets are efficient and the pure rational individuals assumption of expected utility theory which is corner stone of traditional finance paradigm. Behavioral finance which uses psychology and sociology to determine reasons of market fluctuations and anomalies, tries to explain real world in a different way. Behavioral finance assumes that individuals are not rational but they are normal and emphasizes irrational behavioral tendency of individuals. In this context, individuals' illusions and irrational behaviors in decision making process are observed. Studies related to irrational investor behavior explain the irrationality with the tendency of individual investors to act emotional, biased and with psychological perspective rather than rational perspective. With this research, it is questioned whether the irrational individual behavior is the reason of market fluctuations and anomalies. In this way, it is investigated whether the cognitive, emotional and social tendencies of overconfidence, extreme optimism, avoidance of regret avoidance of loss, conservatism and bandwagon effect is existing or not. Also the affect of those tendencies, demographic features, and financial literacy on investors decisions is studied. The possible relationship and differences in demographic variables, financial investor profiles and tendencies that are presented in this research are analyzed through statistical computer programs. As a result of the research it is concluded that individual investors act with cognitive, emotional and social tendencies and there are statistically meaningful relationship and differences in demographic variables, financial profiles and investors' tendencies Keywords: Investor Decisions, Behavioral Finance, Investor Behaviors