Exploring the human factor in decision making: Anchoring bias and investor behavior
Date
2020-05
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Abstract
The objective of this study was to explore how anchoring affects the dynamics of
investor decision making with regard to mutual funds and how this bias differs
amongst genders and level of financial knowledge. The study adds to the body of
knowledge on the influences of behavioural biases in the sub-region to make investors
aware of their biases in order to minimise the influence of these biases on their
investment decisions.
An experimental research design was adopted to uncover the relationship
between the variables under study; this involved the use of a questionnaire with an
embedded experiment. Data obtained from the study were analysed using Pearson’s
chi-square test and two-way analysis of variance. The objectives were to investigate the
extent to which Ghanaian investors are affected by the anchoring bias as well as explore
the degree to which differences in gender and expertise affect the levels of influence
from the anchoring bias. The results showed an association between participants’
susceptibility to anchor with both gender and the level of financial knowledge of
participants. However, this result is not statistically significant and thus cannot be
generalized to the entire population. Females were observed to be more likely to anchor
than their male counterpart. Also, a higher level of financial knowledge did not help to
reduce the possibility of anchoring but rather increased it.
Description
Undergraduate thesis submitted to the Department of Business Administration, Ashesi University, in partial fulfillment of Bachelor of Science degree in Business Administration, May 2020
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Thesis
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Keywords
anchoring bias, investment, mutual funds