Identifying Behavioral Biases Of Investors In Mongolia

Abstract

The objective of this paper is to identify the influence of behavioral biases on investor decisions and ways to avoid them. The effects of these non-financial factors are known to be distinguished into two subtypes, cognitive and emotional. The cognitive biases include anchoring and adjustments, availability, confirmation, and hindsight. For emotional biases, I chose loss aversion, overconfidence, and regret aversion. A total of 160 samples were collected through a survey. The random sample was comprised of individual investors primarily residing in Ulaanbaatar city. Further, to test all my hypotheses, I used a One Sample t-test. The analysis revealed that five out of seven biases significantly affect investment decisions. This finding indicates that behavioral factors do influence investor decisions in Mongolia. It adds to the existing literature in recognizing that an individual's decision-making processes cannot always be as entirely reasonable as most conventional finance theories suggest. It further allows investors to minimize their potential biases and make better informed financial decisions.