Abstract:

Many investors, who want to invest their savings in various investment instruments, make their own investment decisions. Traditional finance theory argues that investors act rationally while making these decisions and does not take into account the psychological state and environmental factors of investors. However, assuming that these decisions are taken rationally in all cases is insufficient to explain certain situations. At this point, the behavioral finance approach, which states that behavioral factors play a role in explaining some price fluctuations and some anomalies in the markets, comes into stage. Behavioral finance states that when the rationality of investors decreases while making their decisions, behaviors and other factors can have an impact on investment decisions. The behavioral finance theory is based on the principle that individual investors do not always act rationally when making investment decisions. In the investment decisions of investors; many different factors can play a role, such as psychological factors, personal characteristics, and society. The aim of this study is to reveal whether the factors put forward by behavioral finance are effective while individual investors are making their decisions. For this purpose, a questionnaire was applied to 320 people in Aydın. Internal consistency and reliability analyses were performed before the data were analyzed. Then, frequency tables were given, factor analysis was performed to classify and reduce the number of variables, t-tests and multiple comparison tests were performed on the factors that were formed, and remarkable findings were interpreted. The evaluation of answers given by the respondents shows that the behavioral finance tendencies such as optimism, ambiguity aversion, belief perseverance, misevaluation of mistakes, herd behavior, gambler's fallacy, overconfidence, self-attribution, loss aversion, momentum, news watchers, representativeness affect the investment decisions of the investors while regret aversion and anchoring effects are low. It was also observed that this effect did not differ according to gender. These results show that the investors in Aydın province are affected by many of the behavioral finance tendencies while making their investment decisions, and that the cognitive, emotional, psychological and social tendencies of the behavioral finance theory have effects on the investment decisions.

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