The Effect of Behavioral Finance on Stock Investment Decisions

Conclusion

The researchers concluded that there was a significant impact of overconfidence, loss aversion, herding risk perception, behavioral finance factors on stock investment decisionmaking at ASE. The findings showed that overconfidence has impacts on the investment decisions. Therefore, individual investors at the ASE should be overconfident at an acceptable level to utilize their skills and knowledge in certain circumstances to improve the investment results. In the uncertainty, the overconfidence can be useful for the investors to do difficult tasks and help them to forecast the future trends. The investors at ASE are very reactive and tend to be under-confident in some cases

The results also showed that there was no significant impact of risk perception on stock investment decision. This may refer to risk type in ASE, where changes in Amman stock exchange usually have no suddenly shock, and trading movement, in general, cover some common stocks belong to company considered as stable company, so investors may believe that there is no significant risk may cause sudden large loss. Furthermore, there was no effect of behavioral factors (overconfidence, loss aversion, risk perception, and herding) attributed to social status and age on investment decisions.

The results indicated that, behavioral finance factors (LossAverse, Overconfidence, and Risk Perception) have significant effect on the stock decision of individual investors in (SSM), while Herd has insignificant effect.

Moreover, the researchers studied the impact of the following behavioral finance factors on stock investment decisions: Loss aversion (avoiding losses is more important than acquiring gains), Overconfidence (overestimate investors knowledge, underestimate risks, and exaggerate their ability to control events), Herding (following the trend), Risk Perception (individual's assessment of the inherent risk in a given situational problem).