Relationship Between Psychological Attitude of Investors and Their Investment Behavior: A Case Study on ISE Investors

Abstract

In financial circles, one of the most discussed and interested topics is the forecastability of stock prices. Many of the studies aiming at determining stock market prices rest on the fact that investors make their decisions rationally based on facts and data. In this paper, we aim to investigate the behavior of individual investors in ISE based on published literature in behavioral finance area. We have found that some psychological prejudice in fact affects the behavior of individual investors. Unlike the conventional assumptions many investors make systematic mistakes and do not utilize rational answers even though it is known. Moreover, media, friends and similar environmental factors also affect the investors’ choices, and processes that turns into herd behavior creating abnormalities in the markets which in turn causes exceptionally high or low reaction