A study on psychological biases, personality traits, and investment behavior from behavioral finance perspective

Investment decision-making is one of the most fundamental yet critical parts of human life. Even though traditional finance defends the idea that humans act rationally in their investment decisions, reality seems to be far from this view. According to the behavioral finance perspective, humans don't act in full rationality while making their investment decisions and they are bound to get affected by their psychological biases and personality traits. Given this, it carries significant importance for researchers to understand the actual investment behavior of the investors under the influence of these biases and personality characteristics. According to the existing behavioral finance literature, overconfidence, herding behavior, and risk tolerance are some of the most studied variables within this context globally. However, the effect of these variables on the investment behavior of Turkish investors is a research area yet to be explored. Additionally, even though these variables are widely studied within the existing literature, there exists a huge research gap regarding the self-monitoring variable in the behavioral finance framework. Therefore, to fill these research gaps, this study aims to analyze the investment behavior of individual investors in the Turkish Stock Exchange Market by examining the impact of overconfidence, herding behavior, risk tolerance, and self monitoring on investment behavior within the behavioral finance framework. Data is collected via online questionnaires from 410 participants and analyzed using regression analysis. The results indicated that overconfidence, herding behavior, risk tolerance, and self-monitoring have a significant positive impact on the investment behavior of Turkish investors. Also, the analysis of demographic factors revealed that overconfidence and risk tolerance differ significantly for gender, investment experience, and investment volume groups whereas herding behavior and self-monitoring are significantly different for monthly income groups in the study. In addition to the academic contributions, it is thought that the findings will be beneficial for individual investors, and financial institutions in terms of understanding the factors affecting investment behaviors in depth.