Home  Journals  Digest Finance  4(268) - 2023 October-December

Methods of diagnosing irrational behavior of retail investors in the financial market

Vol. 28, Iss. 4, DECEMBER 2023

Article PDF Version

Received: 16 October 2023

Received in revised form: 25 October 2023

Accepted: 9 November 2023

Available online: 28 December 2023

Subject Heading: SECURITIES AND FINANCIAL MARKETS

JEL Classification: G10, G12, G17, G18, G19

Pages: 420–438

https://doi.org/10.24891/df.28.4.420

Subject. This article examines the problem of the influence of cognitive distortions on the process of investment decision-making, as well as the development of tools for quantitative and qualitative diagnostics of the irrationality of retail investors.
Objectives. The article aims to test technologies for identifying and quantifying patterns of irrational assessment of financial alternatives, as well as develop recommendations for minimizing their impact on financial markets.
Methods. For the study, we used the methods of formal and logical, and mathematical and statistical analyses.
Results. The article presents a set of author-developed tests that can help identify the ability of cognitive distortions to influence the process of investment decision-making.
Conclusions. The application of the proposed methodology can help solve the problem of monitoring market expectations for panic moods that can have a significant impact on the changes in the financial market as a whole.

Keywords: prospect theory, mental accounting, subadditive discounting, irrational behavior, insignificant factors

References:

1. Vochkanov V.A., Kul'katova G.N. [Keynesianism as a theory of State regulation]. Vestnik Rossiiskogo gosudarstvennogo agrarnogo zaochnogo universiteta, 2023, no. 45, pp. 82–88. (In Russ.)
2. Balikoev V.Z. [The evolution of finance as an economic category]. Vestnik NGUEU = Vestnik NSUEM, 2023, no. 1, pp. 76–90. (In Russ.) URL: Link
3. Protas N.G., Mikhailyuk I.V., Khoroshilov M.S. [The variety of modeling methods in the analysis of financial reporting of the borrower]. Vestnik NGUEU = Vestnik NSUEM, 2023, no. 3, pp. 83–96. (In Russ.) URL: Link
4. Kovalev R.V. [Investor sentiment as a key irrational factor in changes in securities quotes]. Industrial'naya ekonomika = Industrial Economy, 2022, vol. 2, no. 5, pp. 181–188. URL: Link (In Russ.)
5. Jones M.M. [Behavioral economics: Emergence and its basic concepts]. Nauchnye zapiski molodykh issledovatelei = Scientific Notes of Young Researchers, 2021, no. 1, pp. 81–88. URL: Link (In Russ.)
6. Manakhova I.V. [Man in the XXI century: A new view of behavioral economics]. Nauchnye trudy Vol'nogo ekonomicheskogo obshchestva Rossii = Scientific Works of the Free Economic Society of Russia, 2022, vol. 235, no. 3, pp. 249–258. URL: Link (In Russ.)
7. Polozhikhina M.A. [The level of development of behavioral economics in Russia and abroad]. Sotsial'nye novatsii i sotsial'nye nauki, 2023, no. 2, pp. 10–28. (In Russ.) URL: Link
8. Fal'kovskaya K.I. [Theoretical understanding of the concept of “Economic Behavior”]. Moskovskii ekonomicheskii zhurnal, 2023, no. 7. (In Russ.) URL: Link
9. Wesam Al-Saady. [The new approach to portfolio management in a crisis]. Finansovye rynki i banki = Financial Markets and Banks, 2021, no. 1, pp. 37–41. URL: Link (In Russ.)
10. Zoudbin S., Shahbaee B., Bahiraie A. Risk-Based Portfolio Modeling: Kahneman-Tversky Approach. Journal of Neurodevelopmental Cognition, 2022, vol. 2, no. 1, pp. 88–97. URL: Link
11. Dadashi M., Pakmaram A., Rezaei N., Abdi R. Providing a Behavioral Model of Mental Accounting Decision-Making Based on Psychological Components Through Data Theory and Meta-Composition. International Journal of Nonlinear Analysis and Applications, 2023, vol. 14, no. 1, pp. 393–408. URL: Link
12. Vinokurov S.S. [Behavioral “anomalies” and the cost of decision-making]. Vestnik Instituta ekonomiki Rossiiskoi akademii nauk = Bulletin of the Institute of Economics of the Russian Academy of Sciences, 2023, no. 1, pp. 40–57. URL: Link (In Russ.)
13. Popova T.A. [The impact of average per capita income on the household savings rate in the Russian Federation]. Innovatsii i investitsii = Innovation and Investment, 2022, no. 9, pp. 110–113. URL: Link (In Russ.)
14. Weng Jie, Zhang Qirui. Contrasting the Exponential and the Quasi-Hyperbolic Discounting Model for the Intertemporal Choice Date. IETI Transactions on Economics and Management, 2022, vol. 4, no. 3, pp. 33–46. URL: Link.0003
15. Philip George. Why is Yield-Curve Inversion Such a Good Predictor of Recession? Real-World Economics Review, 2023, iss. 103, pp. 122–127. URL: Link
16. Shaposhnikov A. [From the recognition of irrationality of behavior to the new paternalism: literature review on consumption theory and behavioral economics]. Ekonomicheskii vestnik IPU RAN = Economic Bulletin of IPU RAS, 2022, vol. 3, no. 2, pp. 23–44. (In Russ.) URL: Link
17. Dorokhov E.V. [Enhancement of the system of statistical indicators for assessing the state and prospects of development of the stock market]. Voprosy statistiki, 2022, vol. 29, no. 1, pp. 17–27. (In Russ.) URL: Link

View all articles of issue

ISSN 2311-9438 (Online)
ISSN 2073-8005 (Print)

Journal current issue

Vol. 29, Iss. 1 March 2024

Archive