Risk factors in behavioral finance an application for Turkey

Individuals invest to be successful in their life struggle, to get their needs, to increase their living standards and to reach their goals. Investing behaviors of individual investors consist of sub-behaviors such as deciding on an investment, deciding on an investment instrument, deciding on the number of investment instruments, deciding on the duration of keeping the investment instruments and following the investment instruments. Since traditional finance theories are insufficient to explain the behaviors of individual investors, behavioral finance theory, which takes into account the psychological aspects, weakness and emotions of investors, has been used to explain the behavior of investors in recent years. Behavioral finance theory has become increasingly popular and has been used frequently to explain investor behavior. Similarly, the number of research studies on this theory has started to increase all over the world. However, research studies examining investor behaviors in terms of behavioral finance theory have not been conducted sufficiently in Turkey. This study aimed to examine the levels of risk factors such as overconfidence, herd psychology, fear of loss, familiarity, mood (emotional factors) that affect individual investors' investment decisions by using behavioral finance theory. Additionally, it is aimed to examine whether these levels differ according to the demographic characteristics of the investors. The data were collected by questionnaires from 498 people of different ages, education levels, working in different sectors and having different income levels, who are consist of male and females in an equal rate. The findings showed that the factors of overconfidence, herd psychology, fear of loss and familiarity affect the investor' decisions, but the mood (emotional factors) did not affect the investor' decisions. Findings also showed that the factors of overconfidence, herd psychology, fear of loss, familiarity and the mood (emotional factors) that affect the investor' decisions of individual investors differ significantly according to the gender, age, marital status, education level, occupation and income level of investors. No relationship was found between the perception levels of the risk factors and the number of children.