The effect of gambler's fallacy, overconfidence, and herding behavior on risk perception of investors in Kota Kinabalu

Kheirulnizam Abdul Rahim, (2016) The effect of gambler's fallacy, overconfidence, and herding behavior on risk perception of investors in Kota Kinabalu. Masters thesis, Universiti Malaysia Sabah.

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Abstract

Traditional finance suggested that investors are rational, but evidence from the market shows that investors are irrational and do make decisions based on some psychological factors rather than on rational thinking and economics of loss and profit alone. Behavioral finance is the study on the behavior of financial participants in the market and the studies have identified, among others, gamblers fallacy, overconfidence and herding behavior as some of the psychological behavior that effect investment decisions by investors. The objective of this study is to investigate the effect of gamblers fallacy, overconfidence and herding behavior on the risk perception of investors in Kota Kinabalu. Risk is closely associated with finance, with many theories and functions related to it and behavior may cause overestimation or underestimation of risk that could cause error in making investment decisions. The study also tried to investigate the moderating effect of financial knowledge on the relationship between gamblers fallacy, overconfidence and herding behavior on risk perception. The study is conducted using surveys questionnaires on 253 investors in Kota Kinabalu area and the data is run through Smart PLS v2.0 software to find the relationship and moderating effect between the variables. The study shows that gamblers fallacy, overconfidence and herding behavior shown significant positive relationship with risk perception. However, the study failed to find significant evidence of moderating effect of the interaction between financial knowledge on the relationship between gambler's fallacy, overconfidence and herding behavior on risk perception at 95% confidence level.

Item Type: Thesis (Masters)
Uncontrolled Keywords: gamblers fallacy, overconfidence, herding behavior, perception, investors
Subjects: H Social Sciences > HE Transportation and Communications
Divisions: FACULTY > Faculty of Business, Economics and Accounting
Depositing User: Munira
Date Deposited: 27 Oct 2017 07:42
Last Modified: 27 Oct 2017 07:42
URI: http://eprints.ums.edu.my/id/eprint/10430

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