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The Impact of Investor Behavior on Building a Moderate Financial Portfolio (Analytical Research)
Corresponding Author(s) : Haider Abbas abdullah Aljanabi
American Journal of Economics and Business Management,
Vol. 8 No. 6 (2025): June
Abstract
No matter how much science and development progress at the financial and investment level, the investor's behavior remains the main axis in building the investment decision. The research addressed the impact of these behaviors on building the investment portfolio from an analytical perspective. The research reached a set of facts, the most important of which is that the investor often goes with his personal desires at the expense of financial and investment logic. This is a clear indication that the investor's desires and behaviors outperform the scientific and academic decision. The research also put forward a set of recommendations, the most important of which was the necessity of raising the level of awareness among investors in order to recognize that emotion and desire do not meet with scientific methods and approaches in building the investment decision. Accordingly, it is necessary to work on educating investors not to go continuously with emotions and desires that may cause losses in making investment decisions.
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- [1] F. Akhtar and N. Das, "Investor personality and investment performance: from the perspective of psychological traits," Qualitative Research in Financial Markets, 2020.
- [2] J. Almeida and T. C. Gonçalves, "A systematic literature review of investor behavior in the cryptocurrency markets," J. Behav. Exp. Finance, vol. 37, 100785, 2023.
- [3] A. Antony, "Behavioral finance and portfolio management: Review of theory and literature," J. Public Aff., 2020.
- [4] V. S. Athota, V. Pereira, Z. Hasan, D. Vaz, B. Laker, and D. Reppas, "Overcoming financial planners’ cognitive biases through digitalization: A qualitative study," J. Bus. Res., vol. 154, 113291, 2023.
- [5] V. Berthet, "The impact of cognitive biases on professionals' decision-making: A review of four occupational areas," Front. Psychol., 2022.
- [6] M. M. Cao, N. T. Nguyen, and T. T. Tran, "Behavioral factors on individual investors' decision making and investment performance: A survey from the Vietnam Stock Market," J. Asian Finance Econ. Bus., vol. 8, no. 3, pp. 845–853, 2021.
- [7] A. Cascão, A. P. Quelhas, and A. M. Cunha, "Heuristics and cognitive biases in the housing investment market," Int. J. Hous. Markets Anal., vol. 16, no. 5, pp. 991–1006, 2023.
- [8] A. D. Foglie and G. Pola, "Make the best from comparing conventional and Islamic asset classes: A design of an all-seasons combined portfolio," J. Risk Financ. Manag., 2021.
- [9] J. O. Fiet, "Risk avoidance strategies in venture capital markets," Venture Capital, 2022.
- [10] F. Hampl and L. Gyönyörová, "Can Fiat‐backed Stablecoins Be Considered Cash or Cash Equivalents Under International Financial Reporting Standards Rules?," Aust. Account. Rev., 2021.
- [11] M. Hanlon, K. Yeung, and L. Zuo, "Behavioral economics of accounting: A review of archival research on individual decision makers," Contemp. Account. Res., vol. 39, no. 2, pp. 1150–1214, 2022.
- [12] R. D. F. Harris and M. Mazibas, "Portfolio optimization with behavioural preferences and investor memory," Eur. J. Oper. Res., 2022.
- [13] T. Y. Hon, M. Moslehpour, and K. Y. Woo, "Review on behavioral finance with empirical evidence," Adv. Decis. Sci., vol. 25, no. 4, pp. 1–30, 2021.
- [14] M. Irfan and W. Y. Lau, "Asset allocation and performance of Malaysian civil service pension fund," Australas. Account. Bus. Finance J., vol. 18, no. 1, pp. 86–107, 2024.
- [15] K. Kartini and K. NAHDA, "Behavioral biases on investment decision: A case study in Indonesia," J. Asian Finance Econ. Bus., vol. 8, no. 3, pp. 1231–1240, 2021.
- [16] D. Khan, "Cognitive driven biases, investment decision making: The moderating role of financial literacy," Investment Decision Making: The Moderating Role of Financial Literacy, Jan. 5, 2020.
- [17] S. K. Mittal, "Behavior biases and investment decision: theoretical and research framework," Qualitative Research in Financial Markets, 2022.
- [18] N. Nareswari, A. S. Balqista, and N. P. Negoro, "The impact of behavioral aspects on investment decision making," J. Manaj. Dan Keuang., vol. 10, no. 1, pp. 15–27, 2021.
- [19] N. N. Othman, "Emotional Economics: The Role of Psychological Biases in Personal Investment Outcomes," SSRN Working Paper, 2024. [Online]. Available: https://ssrn.com/abstract=4844927
- [20] M. Rahman and S. S. Gan, "Generation Y investment decision: an analysis using behavioural factors," Managerial Finance, 2020.
- [21] R. K. Raut, "Past behaviour, financial literacy and investment decision-making process of individual investors," Int. J. Emerg. Markets, 2020.
- [22] M. A. Sattar, M. Toseef, and M. F. Sattar, "Behavioral finance biases in investment decision making," Int. J. Account. Finance Risk Manag., vol. 5, no. 2, pp. 69–76, 2020.
References
[1] F. Akhtar and N. Das, "Investor personality and investment performance: from the perspective of psychological traits," Qualitative Research in Financial Markets, 2020.
[2] J. Almeida and T. C. Gonçalves, "A systematic literature review of investor behavior in the cryptocurrency markets," J. Behav. Exp. Finance, vol. 37, 100785, 2023.
[3] A. Antony, "Behavioral finance and portfolio management: Review of theory and literature," J. Public Aff., 2020.
[4] V. S. Athota, V. Pereira, Z. Hasan, D. Vaz, B. Laker, and D. Reppas, "Overcoming financial planners’ cognitive biases through digitalization: A qualitative study," J. Bus. Res., vol. 154, 113291, 2023.
[5] V. Berthet, "The impact of cognitive biases on professionals' decision-making: A review of four occupational areas," Front. Psychol., 2022.
[6] M. M. Cao, N. T. Nguyen, and T. T. Tran, "Behavioral factors on individual investors' decision making and investment performance: A survey from the Vietnam Stock Market," J. Asian Finance Econ. Bus., vol. 8, no. 3, pp. 845–853, 2021.
[7] A. Cascão, A. P. Quelhas, and A. M. Cunha, "Heuristics and cognitive biases in the housing investment market," Int. J. Hous. Markets Anal., vol. 16, no. 5, pp. 991–1006, 2023.
[8] A. D. Foglie and G. Pola, "Make the best from comparing conventional and Islamic asset classes: A design of an all-seasons combined portfolio," J. Risk Financ. Manag., 2021.
[9] J. O. Fiet, "Risk avoidance strategies in venture capital markets," Venture Capital, 2022.
[10] F. Hampl and L. Gyönyörová, "Can Fiat‐backed Stablecoins Be Considered Cash or Cash Equivalents Under International Financial Reporting Standards Rules?," Aust. Account. Rev., 2021.
[11] M. Hanlon, K. Yeung, and L. Zuo, "Behavioral economics of accounting: A review of archival research on individual decision makers," Contemp. Account. Res., vol. 39, no. 2, pp. 1150–1214, 2022.
[12] R. D. F. Harris and M. Mazibas, "Portfolio optimization with behavioural preferences and investor memory," Eur. J. Oper. Res., 2022.
[13] T. Y. Hon, M. Moslehpour, and K. Y. Woo, "Review on behavioral finance with empirical evidence," Adv. Decis. Sci., vol. 25, no. 4, pp. 1–30, 2021.
[14] M. Irfan and W. Y. Lau, "Asset allocation and performance of Malaysian civil service pension fund," Australas. Account. Bus. Finance J., vol. 18, no. 1, pp. 86–107, 2024.
[15] K. Kartini and K. NAHDA, "Behavioral biases on investment decision: A case study in Indonesia," J. Asian Finance Econ. Bus., vol. 8, no. 3, pp. 1231–1240, 2021.
[16] D. Khan, "Cognitive driven biases, investment decision making: The moderating role of financial literacy," Investment Decision Making: The Moderating Role of Financial Literacy, Jan. 5, 2020.
[17] S. K. Mittal, "Behavior biases and investment decision: theoretical and research framework," Qualitative Research in Financial Markets, 2022.
[18] N. Nareswari, A. S. Balqista, and N. P. Negoro, "The impact of behavioral aspects on investment decision making," J. Manaj. Dan Keuang., vol. 10, no. 1, pp. 15–27, 2021.
[19] N. N. Othman, "Emotional Economics: The Role of Psychological Biases in Personal Investment Outcomes," SSRN Working Paper, 2024. [Online]. Available: https://ssrn.com/abstract=4844927
[20] M. Rahman and S. S. Gan, "Generation Y investment decision: an analysis using behavioural factors," Managerial Finance, 2020.
[21] R. K. Raut, "Past behaviour, financial literacy and investment decision-making process of individual investors," Int. J. Emerg. Markets, 2020.
[22] M. A. Sattar, M. Toseef, and M. F. Sattar, "Behavioral finance biases in investment decision making," Int. J. Account. Finance Risk Manag., vol. 5, no. 2, pp. 69–76, 2020.