Český finanční a účetní časopis 2016(3):73-87 | DOI: 10.18267/j.cfuc.481

Do investors suffer behavioral biases when deciding?

Jitka Veselá1, Lucie Neubauerová2
1 Jitka Veselá; katedra bankovnictví a pojišťovnictví, Fakulta financí a účetnictví, Vysoká škola ekonomická v Praze, nám. W. Churchilla 4, 130 67 Praha 3; <veselaj@vse.cz>.
2 Lucie Neubauerová; katedra bankovnictví a pojišťovnictví, Fakulta financí a účetnictví, Vysoká škola ekonomická v Praze, nám. W. Churchilla 4, 130 67 Praha 3; <xneul00@vse.cz>.

The concept of individual rationality had been crucial in financial theory. The proponents of behavioral finance argue that investors act irrationally, resulting in financial market distortions, which are not spontaneously corrected. This paper focuses on behavioral biases representing and describing the violation of fundamental axioms of rationality in the investor behavior. Using a questionnaire survey, this article examines the investor's six most common behavioral biases, their impact on the individual decision-making process and in the end formulates recommendations to eliminate their influence.

Keywords: Behavioral finance; Prospect Theory; Behavioral biases.
JEL classification: G02, G11

Published: October 1, 2016  Show citation

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Veselá, J., & Neubauerová, L. (2016). Do investors suffer behavioral biases when deciding? Czech Financial and Accounting Journal, 2016(3), 73-87. doi: 10.18267/j.cfuc.481
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