Identifying the Underlying Factors of Emotional Behavior in Iran's Capital Market

Mokhtari Khatunabad, Zeinab; Haghighat, Jafar; Fazlzadeh, AliReza; Karimi, Zahra

doi:10.48308/jep.2024.236462.1184

Identifying the Underlying Factors of Emotional Behavior in Iran's Capital Market

Document Type : Original Article

Authors

¹ Ph.D. Candidate, Faculty of Economics, Management and Commerce, Tabriz University, Tabriz, Iran

² Professor of Economics, Faculty of Economics, Management and Commerce, Tabriz University, Tabriz, Iran

³ Associate Professor of Economics, Faculty of Economics, Management and Commerce, Tabriz University, Tabriz, Iran

⁴ Associate Professor of Economics, Faculty of Economics & Amp; Management, University of Tabriz, Tabriz, Iran

10.48308/jep.2024.236462.1184

Abstract

Due to the prominence of the capital market as a financing source for the country's industries and the problems of emotional behavior in investment, the key aim of this study is to recognize the underlying factors, causes, and challenges of emotional behavior and to identify management strategies for emotional behavior in Iran's capital market. The statistical population of the present study consists of professors, experts, and specialists in the field of managing emotional behavior and investing in the capital market, as well as real shareholders with experience, who were selected by purposive sampling and with maximum diversity until reaching theoretical saturation of 12 people. In this study, it was tried to analyze the data achieved from the interview by using Clarke and Braun's six-stage thematic analysis qualitative research method and by using open, central, and selective coding. Regarding the attained results, 16 main themes were identified for the underlying factors of emotional behavior and 8 main themes were identified for the causes of emotional behavior. The studied sample achieved results analysis indicate that 6 main strategies have been identified for managing emotional behavior, which are: awareness, independence of action, market orientation, insurance tools, problem-solving and correct decision-making, and emotion control.

Keywords

References

Abdillah, W., Permatasari, R., & Hendrawaty, E. (2019). Understanding determinants of individual intention to invest in digital risky investment. JDM (Jurnal Dinamika Manajemen), 10(1), 124-137.

Aghababaei, M. E., & Khademi, S. (2019). Factors affecting personal financial management behaviors–The case of Iranian youth. Journal of financial management strategy, 7(24), 123-143. (In Persian)

Ahmad, M., & Wu, Q. (2022). Does herding behavior matter in investment management and perceived market efficiency? Evidence from an emerging market. Management Decision, 60(8), 2148-2173.

Almansour, B. Y., Elkrghli, S., & Almansour, A. Y. (2023). Behavioral finance factors and investment decisions: A mediating role of risk perception. Cogent Economics & Finance, 11(2), 2239032.

Bahaghighat, E., & Esmaeil, Z. M. A. (2021). The Effect of Investors' Emotional Behavior with the Moderating Role of Public Confidence in Stock Prices. Financial accounting and auditing research, 13(51), 21-40. (In Persian)

Bahrololoum, M., & Mobarhan, E. (2020). Identification and analyzing of behaviourial factors affecting investors failure in Irans stock market. Journal of Securities Exchange, 13(50), 81-108. (In Persian)

Bertoni, M., Bonfatti, A., Celidoni, M., Crema, A., & Dal Bianco, C. (2019). 4. Personality traits and financial behaviour. In Health and socio-economic status over the life course: First results from SHARE Waves 6 and 7 (pp. 49-56). De Gruyter.

Bouzguenda, K. (2018). Emotional intelligence and financial decision making: are we talking about a paradigmatic shift or a change in practices?. Research in international business and finance, 44, 273-284.

Braun, V., & Clarke, V. (2006). Using thematic analysis in psychology. Qualitative research in psychology, 3(2), 77-101.

Cannon, W. B. (1987). The James-Lange theory of emotions: a critical examination and an alternative theory. The American journal of psychology, 100(3/4), 567-586.

Cao, M. M., Nguyen, N. T., & Tran, T. T. (2021). Behavioral factors on individual investors' decision making and investment performance: A survey from the Vietnam Stock Market. The Journal of Asian Finance, Economics and Business, 8(3), 845-853.

Dadgar, Y., Dargahi, H., & Gholizadeh, S. (2023). The Role of Investor Sentiment and Government Behaviour in Volatility of Tehran Stock Exchange Market: A Behavioural Economics Approach. Quarterly Journal of Applied Theories of Economics, 10(1), 191-214. (In Persian)

Dehghan Benaraki, S. S., Amini Sabegh, Z., & Sadeh, E. (2021). The role of emotional behaviors in stock price fluctuations of tehran stock exchange and securities organization. Business Management Quarterly, 12(45), 53-73.

Dror, O. E. (2017). Deconstructing the “two factors”: The historical origins of the Schachter–Singer theory of emotions. Emotion Review, 9(1), 7-16.

Duxbury, D., Gärling, T., Gamble, A., & Klass, V. (2020). How emotions influence behavior in financial markets: a conceptual analysis and emotion-based account of buy-sell preferences. The European Journal of Finance, 26(14), 1417-1438.

Fitra, H., Rasyid, R., & Susanti, Y. (2018, July). The influence of locus of control and financial knowledge to employee investing decision PT. Pertamina (Persero) Branch of Padang. In First Padang International Conference on Economics Education, Economics, Business and Management, Accounting and Entrepreneurship (PICEEBA 2018) (pp. 340-350). Atlantis Press.

Fooladi, A., Esfahani, S. T., & Abadi, H. E. M. (2022). The Impact of Behavioral Financial Characteristics on Investment Decisions by Emphasizing the Mediating Role of Individual and General Characteristics of Investors in Tehran Stock Exchange. Financial and Behavioral Researches in Accountin. 1(3), 89-114. (In Persian)

Gabunia, T. (2023). Schachter-Singer Theory–Examples and Definition. Zugriff am, 12, 2023.

Hassas Yeganeh, Y., Ebrahimi Sarv Olia, M. H., Ghazi Nouri, S. S., & Afkhami, A. (2019). Angel Investors: Examining Behavioral Finance Factors Influencing Investment Selection. Financial Knowledge of Securities Analysis, 12(43), 41-58. (In Persian)

He, G., Zhu, S., & Gu, H. (2020). The nonlinear relationship between investor sentiment, stock return, and volatility. Discrete Dynamics in Nature and Society, 2020(1), 5454625.

Hemati, D., Esmayeelzadeh, A., & KORDLOUIE, H. (2023). Stock Price Synchronicity and Herd Behavior of Decision on the Capital Market: Testing Moderating Role of Institutional Shareholders. Journal of Investment Knowledge, 12(48), 171-192. (In Persian)

Hosseini, Y., Jamshidinavid, B., Kheirollahi, F., & Rasooliazad, M. (2024). Psychological and effective symptoms among Pompian’s behavioral investor types in Tehran stock Exchange. Consumer Behavior Studies Journal, 10(4), 206-219. (In Persian)

Izard, C. E. (2009). Emotion theory and research: Highlights, unanswered questions, and emerging issues. Annual review of psychology, 60(1), 1-25.

Kakaei, H., Mohammadian, A., Abbasi, P., & Momeni, M. (2021). Investigating the Relationship between Individual Factors and Financial Behaviors of Iran Stock Exchange Investors. Quarterly Journal of Modern Research Approaches in Management and Accounting, 5(54), 126-135. (In Persian)

Khosravani, A., Talebnia, G., & Saraf, F. (2021). Provide a model to identify human and social factors affecting the behavior of investors in the Iranian capital market. Journal of Management Accounting and Auditing Knowledge, 10(39), 249-266. (In Persian)

Komalasari, P. T., Asri, M., Purwanto, B. M., & Setiyono, B. (2022). Herding behaviour in the capital market: what do we know and what is next? Management Review Quarterly, 72(3):745-787.‏ (In Persian)

Lerner, J. S., Li, Y., Valdesolo, P., & Kassam, K. S. (2015). Emotion and decision making. Annual review of psychology, 66(1), 799-823.

Maulida, A. Z., & Sari, S. P. (2023). Behavioral finance and financial literacy affecting investor millenial decision making process on sharia stock. American Journal of Sciences and Engineering Research E-ISSN-2348–703X, 6(2).

Nayebmohseni, S., Khalifehsultani, S. A., & Hejazi, R. (2022). Developing a Behavioral Model of Individual Investors’ Decision-making in the Iranian Capital Market. Financial Research Journal, 23(4), 625-652. (In Persian)

Osoolian, M., Hasannejad, M., Sadeghi Sharif, S. J., & Hamzenejadi, Y. (2021). Intuitive Thinking, Behavioral Biases and Performance of Professional Investors in Tehran Stock Exchange. Financial Research Journal, 23(1), 17-39. (In Persian)

Padmavathy, M. (2024). Behavioral Finance and Stock Market Anomalies: Exploring Psychological Factors Influencing Investment Decisions. Shanlax International Journal of Management, 11(S1), 191-97.

Pandey, D. K., Lucey, B. M., & Kumar, S. (2023). Border disputes, conflicts, war, and financial markets research: a systematic review. Research in International Business and Finance, 65, 101972.

Ratnalikar, V., Chandani, A., Bhatia, A., & Mehta, D. (2020). A Study on Human Behavioral Aspects on Individual Financial Decisions in Indian Context. SSRN.

Salami, M., Shaghaghi, M. E., & Fard, S. M. (2021). Investigating the Effect of Personality Traits and Individual Motivation on the Tendency of Investors' Herd Behavior with the Moderating Role of Experience and Financial Knowledge in Tehran Stock Exchange. financial and behavioral researches in accounting, 1(2), 1-20. (In Persian)

Sattar, M. A., Toseef, M., & Sattar, M. F. (2020). Behavioral finance biases in investment decision making. International Journal of Accounting, Finance and Risk Management, 5(2), 69. (In Persian)

Sedliačiková, M., Aláč, P., & Moresová, M. (2020). How behavioral aspects influence the Sustainable Financial decisions of shareholders: an empirical study and proposal for a relevant decision-making Concept. Sustainability, 12(12), 4813.

Sha, N., & Ismail, M. Y. (2021). Behavioral investor types and financial market players in Oman. The Journal of Asian Finance, Economics and Business, 8(1), 285-294.

Shahabirad, E., Faghani Makrani, K., & Zabihi, A. (2022). A Model to Identify the Impact of Spiritual Intelligence on Emotional Intelligence and Its Role in Behavioral Bias Control (Based on Halo Error) and its Role on Investor Decision Making. Journal of Investment Knowledge, 11(42), 659-683. (In Persian)

Sharma, A., & Kumar, A. (2020). A review paper on behavioral finance: study of emerging trends. Qualitative research in financial markets, 12(2), 137-157.

Tootian Esfahani, S., Eslami Mofidabadi, H., & Barkhordari, E. (2021). Investigating the relationship between self-control strategies, managers' financial literacy and the quality of decision-making in financial issues of the supply chain process of companies admitted to the Tehran Stock Exchange. Operations management, 1(1), 91-131. (In Persian)

Vuković, M., & Pivac, S. (2024). The impact of behavioral factors on investment decisions and investment performance in Croatian stock market. Managerial Finance, 50(2), 349-366.

Wang, Y., Zhang, Y., & Fu, Y. (2022). [Retracted] Relationship between Investor Sentiment and Price Fluctuation of SSE 50ETF Options. Computational Intelligence and Neuroscience, 2022(1), 8992779.

Yasmin, F., & Ferdaous, J. (2023). Behavioral biases affecting investment decisions of capital market investors in Bangladesh: A behavioral finance approach. Investment Management and Financial Innovations, 20(2), 149-159.