Evaluating behavioral portfolio theory on investors' purchase decisions at Tehran stock exchange

Mirahmad Amirshahi*, Vida Siahtiri

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contributionpeer-review

Abstract

More than 50 years ago Friedman and Savage [1] stated that investors who purchase lottery tickets (risk taking behavior), buy insurance coverage (risk averse behavior) at the same time. They proposed an "S" shape utility function that features concave as loss and convex as winning. Eisenhauer [2] and many other researchers have confirmed risk behavior, as suggested by Friedman and Savage. Shefrin and Statman [3] combined: 1) Prospect Theory of Kahnman & Teversky [4], 2) Lops' Security, Potential, and Aspiration (SP/A) Theory [5], and 3) Thaler's Mental Account Theory [6] and presented a new descriptive model that shows investors design their portfolios as layered pyramid consisting of many different layers according to their investment goals and dominant emotions. The objective of this survey research is to trace the presence of layered pyramid of portfolios according to Behavioral Portfolio Theory among the potential investors at Tehran Stock Exchange (TSE). 356 respondents who were chosen through random sampling among the potential investors at TSE have completed a questionnaire. Research data was analyzed with the help of explorative factor analysis. Research findings indicate six main factors that influence Iranian investors' purchase decisions as: "familiarity," "hope," "fear," "optimism," "pessimism," and "aspiration".

Original languageEnglish
Title of host publication2010 International Conference on Financial Theory and Engineering, ICFTE 2010
Place of PublicationPiscataway, NJ
Pages205-209
Number of pages5
DOIs
Publication statusPublished - 2010
Externally publishedYes
Event2010 International Conference on Financial Theory and Engineering, ICFTE 2010 - Dubai, United Arab Emirates
Duration: 18 Jun 201020 Jun 2010

Other

Other2010 International Conference on Financial Theory and Engineering, ICFTE 2010
CountryUnited Arab Emirates
CityDubai
Period18/06/1020/06/10

Keywords

  • Behavioral portfolio theory
  • Mental accounting
  • Normal investors
  • Tehran stock exchange

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