project body.docx

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Introduction

1

“One of the funny things about

the stock market is that every

time one person buys, another

sells, and both think they are

astute.” - William Feather


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RESEARCH PROBLEM

Research problem is nothing but the defining and re-defining the objectives till

a proper & consolidated problem can visualize. Research problem of my

study is-

“A Study on Heuristics due to Investors’ Psychology in

Finncil !rding"

Behavioral economists firmly believe that psychological factors influence

investment decisions. They argue that today’s investment decisions demand a

better understanding of individual investors’ behavioral biases.

Psychologicl Fctors A##ecting Behviors o# Individul trders

1. verconfidence

!. "#cessive ptimism

$. "#cessive %essimistic

. 'erd Behavior

(. )nertia

*. +ental accounting

,. Biases

)n this study the aim is to establish the e#istence of fundamental issues

driven by various psychological biases in the investment decision-maing

process.

!


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An O$ER$IE% o# HE&RIS!ICS

Heuristics

“Heuristics are simple efficient rules of the thumb which have been

proposed to explain how people make decisions, come to judgments and

solve problems, typically when facing complex problems or incomplete

information. These rules work well under most circumstances, but in certain

cases lead to systematic cognitive biases” / 0aniel ahneman

Tversy and ahneman identified the influence of human heuristics on the

decision maing process. Tversy defined heuristic as a strategy 2hich can be

applied to a variety of problems that usually/but not al2ays/yields a correct

solution. %eople often use heuristics 3or shortcuts4 that reduce comple#

problem solving to more simple judgmental operations 3Tversy and

ahneman 15614. 'euristic decision process is the process by 2hich the

investors find things out for themselves usually by trial and error lead to the

development of rules of thumb.

'euristics 2hich e#presses that individuals have a tendency to mae

judgments 7uicly are simplifying strategies used to approach comple#

problems and limit e#planatory information. )ndividual investors tend to tae

decisions usually by trial and error method thus developing rules of thumb. To

put it simply investors use rules of thumb in order to process comple#

information so as to mae investment decisions. )t may be possible that

$


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investors have obtained appropriate information and evaluate all these in an

objective manner but it is very difficult to separate one from emotional and

cognitive errors involved in each and every step undertaen by the investor.

8ometimes it may lead to a favorable decision but many a times it may result

in unfavorable and poor decision outcomes.

)n other 2ords it refers to rules of thumb 2hich humans use to made

decisions in comple# uncertain environments +an is not capable to process

all the information that one is presented 2ith on a daily basis. 9hile

accumulating e#perience through the process of doing something those

e#periences gives an impression of ho2 something 2ors. This process creates

rules of thumb that can then be used 2hen a similar situation is encountered.

This phenomenon is called the use of heuristics.


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Behviorl Finnce nd 'ecision M(ing

“ehavioral !inance is becoming an integral part of decision"making

process because it heavily influences the investors# performance”.

)Bner*ee+ ,-../

“$n understanding of how our emotions result in irrational behavior is

indispensable for any investor”. )Pri(h+ ,-../

0ecision-maing can be defined as the process of choosing a particular

alternative from many available alternatives. )t is a complicated multi-step

process involving analysis of various personal technical and situational

factors. There are no e#ceptions in the case of maing decisions in the stoc

marets either. Taing investment decisions is the most crucial challenge faced

by investors. 8ome personal factors are age education income etc. n the

technical side investment decisions can be derived from various models of

finance for e.g. the capital asset pricing model 3:;%+4. 0ecisions should not

be reached 2ithout considering situational factors that tae into account the

environment the maret psychology in other 2ords.

"ffective decision maing in the stoc maret re7uires an understanding of

human nature in a global perspective on top of financial sills. Thus cognitive

(


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psychology should be given importance in the process of decision-maing

3:handra !


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investor can be defined as a one that al2ays 3i4 updates his beliefs in a timely

and appropriate manner on receiving ne2 information@ 3ii4 maes choices that

are normatively acceptable )n 2hat is very liely to be termed as an =anomaly>

by most traditional economic theories the foundations of the 2orld economy

2ere shaen by the Ainancial :risis of !


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3!


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themselves is better than is actually the case. ; common trait among investors

is a general overconfidence of their o2n ability 2hen it comes to picing

stocs and to decide 2hen to enter or e#it a position. These tendencies 2ere

researched by dean 315564 and it 2as found that traders that conducted the

most trades tended on average to receive significantly lo2er yields than the

maret. Aurthermore psychologists have determined that overconfidence

causes people to overestimate their no2ledge underestimate riss and

e#aggerate their ability to control events. 8pecific security selection is a highly

difficult undertaing. )nterestingly this type of activity is precisely the tas at

2hich people e#hibit the greatest overconfidence 3?ofsinger !


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the period Aebruary 156* to ;pril !


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characteristic of its stoc. These companies turn out to be poor investments

more often than not 3Daonisho et al 1554. 16

Herding Bis

'erding in financial marets can be defined as mutual imitation leading to a

convergence of action 3'irshleifer and Teoh !


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individually. ne reason is that people are sociable and generally tend to see

acceptance from the group rather than being a standout. ;nother reason is that

investors tend to thin that it is unliely that a large group could be 2rong.

This could mae him follo2 the herd under the illusion that the herd may

no2 something he does not.

"conomou ostais and %hilippas 3!


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of a partial computation. %n either case, adjustments are typically

insufficient )*lovic and +ichtenstein, -/. That is, different starting points

yield different estimates, which are biased toward the initial values. 0e call

this phenomenon $nchoring.( )!vers(y nd 1hne2n+ .345/6

;nchoring is a psychological heuristic 2hich can be said to occur 2hen

investors give unnecessary importance to statistically random and

psychologically determined Janchors’ 2hich leads them to investment

decisions that are not essentially Jrational’. 9hen re7uired to estimate a good

buy price for a share and investor is liely to start by using an initial value /

called the =anchor> / 2ithout much analysis say for e.g. the (!-2ee lo2 of

the stoc. Then they adjust this anchor up or do2n to reflect their analysis or

ne2 information but studies have sho2n that this adjustment is insufficient

and ends producing results that are biased. )nvestors e#hibiting this bias are

liely to be influenced by these anchors 2hile ans2ering ey 7uestions lie J)s

this a good time to buy or sell the stocF’ or Jis the stoc fairly pricedF’ The

concept of ;nchoring can thus be e#plained by the tendency of investors to

=anchor> their thoughts to a logically irrelevant reference point 2hile maing

an investment decision 3%ompian !


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2ith the help of business administration undergraduate students and results

sho2ed that the participants treated the proposed selling price as an anchor.

;ndersen 3!


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reaching rationali'ations in order to synchroni'e their cognitions and

maintain psychological stability” )Po20in+ ,--7/6

;ccording to %ompian 3!


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mainly because the outcomes of the alternative are visibly better for the

investor to see. The root cause of this type of error is the tendency that

individuals hate to admit their mistaes. Because of suffering from this bias

investors may avoid taing decisive actions for the fear that 2hatever

decisions they mae tae 2ill be sub-optimal in 'indsight. ne potential

do2nside is that this could lead investors into holding onto a losing position

for too long because of un2illingness to admit and rectify mistaes in a

timely manner. ;nother do2nside is that it can stop investors from maing an

entry into the maret 2hen there has been a do2ntrend 2hich is sho2ing

signs of ending and signals that it is a good time to buy. The Aear of Regret

happens often 2hen individuals procrastinate 2hile maing decisions. Larious

psychology e#perimental studies suggest that regret influences decision-

maing under uncertainty.

92:lers’ Fllcy Bis

“3erhaps the most bi'arre argument for being bullish is the belief that

markets can#t go down for four years in a row. This is a prime example of

the ;amblers# !allacy.” Montier ),--;/6

ahneman and Tversy 315,14 describe the heart of gambler’s fallacy as a

misconception of the fairness of the la2s of chance. ne major impact on the

financial maret is that investors suffering from this bias are liely to be

1,


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biased to2ards predicting reversals in stoc prices. Camblers’ Aallacy arises

2hen investors inappropriately predict that trend 2ill reverse and are dra2n

into contrarian thining. Camblers’ Aallacy is said to occur 2hen an investor

operates under the perception that errors in random events are self-correcting.

Aor instance if a fair coin is tossed ten times and it land on heads each time

an investor 2ho feels that the ne#t flip 2ill result in tails can be said to be

suffering from this bias.

Mentl Accounting Bis

+ental ;ccounting 2as coined by Richard Thaler and defined by Thaler

315554 as the “set of cognitive operations used by individuals and

households to organi'e, evaluate, and keep track of financial activities.”

+ental ;ccounting is the set of cognitive operations used by individuals and

households to organize evaluate and eep trac of financial activities. This

result in a tendency for people to separate their money into separate accounts

based on a variety of subjective reasons.

Pros0ect !heory

ahneman and Tversy 315,54 found empirically that people under2eight

outcomes that are merely probable in comparison 2ith outcomes that are

obtained 2ith certainty@ also that people generally discard components that are

shared by all prospects under consideration. The prospect theory describes

ho2 people frame and value a decision involving uncertainty. nder prospect

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theory value is assigned to gains and losses rather than to final assets@ also

probabilities are replaced by decision 2eights. ;ccordingly people loo at

choices in terms of potential gains or losses in relation to a specific reference

point 2hich is often the purchase price. ;nd ho2 do people value

gainsMlossesF

They value gainsMlosses according to a 8- shaped utility function as depicted in

the diagram 1 belo2 i.e. %eople feel more pain from a loss than the pleasure

from a similar amount.

'igr2 ,6.


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The utility function is conve# for losses. This means that people e#perience

pain 2hen they lose but t2ice the loss does not mean t2ice the pain.

The utility function is steeper for losses than for gains. This means that people

feel more strongly about the pain from a loss than the pleasure from an e7ual

gainE - about t2o and half times as strongly according to ahneman Tversy.

This phenomenon is referred to as loss aversion .Because of loss aversion the

manner in 2hich an outcome is described-either in the vocabulary of gains or

in the vocabulary of losses - has an important bearing on decision maing.

ahneman netsch and Thaler 3155


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'igr2< !y0icl 0ro::ility =eighting #unctions #or gins )=>/ nd

losses )=8/ in cu2ultive 0ros0ect theory

Source< 0aniel ahneman & ;mos Tversy 315,54 =%rospect TheoryE ;n

;nalysis of Decision under Risk” "conometrica Lol. ,6

!1


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RE$IE% o#

LI!ERA!&RE

!!

“Behavioral fnance is

the study o the

inuence o psychology

on the behaviour o

fnancial practitioners

and the subsequent


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!rditionl !heory o# Finnce

Ainance can be broadly defined as the study of ho2 scare resources are

allocated by humans and ho2 these resources are managed ac7uired and

invested over time. There are t2o ey paradigms 2ithin the traditional Theory

of Ainance E3i4 +aret agents are perfectly rationalE perfect rational behavior

implies that any ne2 available information is interpreted correctly and

uniformly but all maret agents 2hile updating their beliefs and 3ii4 +arets

are "fficientE The "fficient +aret 'ypothesis 3"+'4 states all relevant

information are reflected in the prices instantaneously and completely. 9hen

the hypothesis holds prices are right and there is Nno free lunchN. i.e. there is

no investment strategy 2hich can earn e#cess ris-adjusted average returns

consistently. ver the past fifty years there has been a lot of focus on the

development and testing of various sophisticated asset pricing models.

8ubrahmanyam 3!


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9hile this 2as happening in the financial 2orld researchers in psychology

2ere discovering that people often behave in odd 2ays 2hile maing

decisions 2here money is involved. %sychologists have found that economic

decisions are often made in a seemingly irrational manner. :ognitive errors

and e#treme emotions can cause investors to mae bad investment decisions.

8hiller 3!that :;%+ "+' and other traditional financial theories did a great job in

predicting and e#plaining certain events. 'o2ever academics also started to

find anomalies and behaviors 2hich these traditional theories could not

e#plain. T2o popular e#amples are

3i4 The Kanuary "ffect an anomaly in the financial maret 2here the

prices of a security increase in the month of Kanuary 2ithout

fundamental reasons 3Rozeff and inney 15,*4

3ii4 The 9innerNs :urse 2here the 2inning big in an auction tends to

e#ceed intrinsic value of the item purchased mainly due to

incomplete information and emotions leading bidders to

overestimating the itemNs value. 3Thaler 15664. ;cademics 2ere

prompted to loo to cognitive psychology to account for irrational and

illogical investor behavior 3%hung !!


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!he E##icient Mr(et Hy0othesis

($n >efficient> market is defined as a market where there are large numbers

of rational, profit"maximi'es actively competing, with each trying to predict

future market values of individual securities, and where important current

information is almost freely available to all participants. %n an efficient

market, competition among the many intelligent participants leads to a

situation where, at any point in time, actual prices of individual securities

already reflect the effects of information based both on events that have

already occurred and on events which, as of now, the market expects to take

place in the future. %n other words, in an efficient market at any point in

time the actual price of a security will be a good estimate of its intrinsic

value.( 3Aama 15*(4

The "fficient +aret 'ypothesis 3"+'4 has been a central finance paradigm

for over < years probably the most criticized too. Aama 315,


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-centered on 2hy the hypothesis should hold- developed supported by

immense theoretical and empirical success. The niversity of :hicago home

to the "+' became the 2orld’s center of academic finance.

The theoretical foundation of "+' is based on three ey arguments

3i4 )nvestors are rational and value securities rationally

3ii4 )n case some investors are irrational their trades are random and cancel

each other out 2ithout affecting prices

3iii4 Rational arbitrageurs eliminate the influence of irrational investors on

maret.

The fact that "fficient +aret 'ypothesis 2as not purely based on rationality

alone but also predicted efficient marets in cases 2here rationality did not

e#ist gave the theory a lot of credibility. The empirical evidence from the

15,


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Origin o# the Behviorl Finnce

Behavioral finance is a branch of finance that studies ho2 the behavior of

agents in the financial maret and influenced by psychological factors and the

resulting influence on decisions made 2hile buying or selling the maret thus

affecting the prices. The science aims to e#plain the reasons 2hy it’s

reasonable to believe that marets are inefficient ;ccording to 8e2ell 3!


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“ehavioral finance relaxes the traditional assumptions of financial

economics by incorporating these observable, systematic, and very human

departures from rationality into standard models of financial markets. The

tendency for human beings to be overconfident causes the first bias in

investors, and the human desire to avoid regret prompts the second” ( Barber

and dean 15554.

Thus Behavioral finance can be defined as a field of finance that proposes

e#planation of stoc maret anomalies using identified psychological biases

rather than dismissing them as “chance results consistent with the market

efficiency hypothesis.” ( Aama 15564. )t is assumed that individual investors

and maret outcomes are influenced by information structure and various

characteristics of maret participants 3Banerjee !


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doctrines of the traditional paradigm that is 3i4 agents fail to update their

beliefs correctly and 3ii4 there is a systematic deviation from the normative

process in maing investment choices. 3ishore !


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RE$IE% o# EARLIER RESEARCHES

The ey research 2ors on this area 2as done by 0aniel ahneman and ;mos

Tversy recognized as the Aathers of Behavioral Ainance. )n the 15*


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randomly drawn from a population as highly representative” 3ahneman

and Tversy 15,14.

)n their 15,! publication titled =8ubjective probabilityE ; judgment of

Representativeness> they study the Representativeness bias - 2hich is

e#plained later in this study / and follo2ed it up 2ith a 15,$ publication titled

=n the psychology of prediction> 2hich says that Representativeness play a

ey role in intuitive predictions made by individuals 3ahneman and Tversy

15,! 15,$4.

?udg2ent under &ncertinty< Heuristics nd Bises

)1hne2n nd !vers(y+ .34,+ .34;/6

)n .345 “?udg2ent under &ncertinty< Heuristics nd Bises"+

)1hne2n nd !vers(y+ .34,+ .34;/+ ne of the prominent 2ors 2as

published. They described three heuristics /

Re0resenttiveness+

Avil:ility

Anchoring

They said that “a better understanding of these heuristics and biases to

which they lead could improve judgment and decisions in situations of

uncertainty”.

)n 15,5 their most important 2or titled “Pros0ect !heory< An nlysis o#

decision under ris(" appeared in Econometrica 2hich 2as Ja criti7ue of

e#pected utility theory as a descriptive model of decision maing under ris’

and the alternative model developed 2as called %rospect Theory. ahneman

$1


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2as a2arded the ?obel %rize in "conomics in !Theory.

)n another important paper Tversy and ahneman 315614 introduced the

effect famous as Araming. )t 2as sho2n that 2hen the same problem 2as

framed in different 2ays the psychological principles that governed the

perception of decision problems and evaluation of probabilities and outcomes

produced predicated shifts of preference.

So2e other literry =or(s there =ere revie=ed re

su22ri@ed :elo=<

'offmann 8hefrin and %ennings 3!


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!he i20ct o# :ehviorl #ctors nd investor’s 0sychology on

their decision82(ing

:handra 3!


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Behviorl Finnce8 Student Pers0ective’

8airafi 8elleby and 8tahl 3!


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!he role o# :ehviorl #innce nd investor 0sychology

in invest2ent decision 2(ing

9a2eru +unyoi and liana 3!


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relevance ratings and lo2er investment attractiveness ratings 2hile provided

2ith simultaneous negative information in comparison 2ith se7uential

negative information3consistent 2ith phenomena of multiple loss aversion and

loss buffering4. )nvestors’ relevance and attractiveness ratings 2ere higher

2hen positive information 2as provided se7uentially 3consistent 2ith gain

savoring4. The study categorized investors as current and prospective. )t 2as

e#amined ho2 they evaluate positive and negative information presented

se7uentially or simultaneously aimed to determine 2hether these results can

be generalized to apply to investment related information and 2hether investor

status affects this evaluation.

!he :ehviorl 0tterns ehi:ited :y investors in ris(

situtions+

Crou and Toba 3!


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four e#periments under various settings. Results sho2ed that invested

proportions 2ere significantly higher in no2n distributions. "ven though

students e#hibited ambiguity aversion not many 2ere 2illing to pay a price to

reduce or eliminate the ambiguity

OB?EC!I$ES

OF !HE S!&'$,


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OB?EC!I$ES OF !HE S!&'

Behavioral economists firmly believe that psychological factors influence

investment decisions. They argue that today’s investment decisions demand a

better understanding of individual investors’ behavioral biases.

Psychologicl Fctors A##ecting Behviors o# Individul trders

1 verconfidence

! "#cessive ptimism

$ "#cessive %essimistic

'erd Behavior

( )nertia

* +ental accounting

$6


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, Biases

)n this study the aim is to establish the e#istence of fundamental issues

driven by various psychological biases in the investment decision-maing process.

PRIMAR OB?EC!I$ES


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traders in understanding emotional and behavioral factors need to be

incorporated in the investment strategies.

$lue dded

9ith an objective to create investor’s confidence in the 8toc maret

behavioral issues are the ne2est of the things 2hich must be considered 2hile

formulating investment strategies.

This research 2ill help investment advisors and finance professionals judge

investor’s attitude to2ards ris in a better 2ay thus leading to better

investment decision-maing.


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RESEARCH

ME!HO'OLO9

1

It is the process used to

collect information and dat

a for the purpose

of making business decision

s. The methodology may

include publication researc

h , intervies , surveys and

other research techni!ues ,

and could include both

present and historical

information.

http://www.businessdictionary.com/definition/process.htmlhttp://www.businessdictionary.com/definition/information.htmlhttp://www.businessdictionary.com/definition/data.htmlhttp://www.businessdictionary.com/definition/data.htmlhttp://www.businessdictionary.com/definition/maker.htmlhttp://www.businessdictionary.com/definition/business.htmlhttp://www.businessdictionary.com/definition/decision.htmlhttp://www.businessdictionary.com/definition/decision.htmlhttp://www.businessdictionary.com/definition/methodology.htmlhttp://www.businessdictionary.com/definition/publication.htmlhttp://www.businessdictionary.com/definition/research.htmlhttp://www.businessdictionary.com/definition/research.htmlhttp://www.businessdictionary.com/definition/interview.htmlhttp://www.businessdictionary.com/definition/survey.htmlhttp://www.businessdictionary.com/definition/technique.htmlhttp://www.businessdictionary.com/definition/information.htmlhttp://www.businessdictionary.com/definition/data.htmlhttp://www.businessdictionary.com/definition/data.htmlhttp://www.businessdictionary.com/definition/maker.htmlhttp://www.businessdictionary.com/definition/business.htmlhttp://www.businessdictionary.com/definition/decision.htmlhttp://www.businessdictionary.com/definition/decision.htmlhttp://www.businessdictionary.com/definition/methodology.htmlhttp://www.businessdictionary.com/definition/publication.htmlhttp://www.businessdictionary.com/definition/research.htmlhttp://www.businessdictionary.com/definition/research.htmlhttp://www.businessdictionary.com/definition/interview.htmlhttp://www.businessdictionary.com/definition/survey.htmlhttp://www.businessdictionary.com/definition/technique.htmlhttp://www.businessdictionary.com/definition/process.html


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RESEARCH ME!HO'OLO9

'e#inition o# RESEARCH

Research is a “structured enDuiry tht utili@es cce0t:le scienti#ic2ethodology to solve 0ro:le2s nd crete ne= (no=ledge tht is

generlly 00lic:le"6 Research refers to “ serch #or (no=ledge"6 ne

can also define research as a scientific and systematic search for pertinent

information on a specific scientific investigation. The ;dvanced Dearner’s

0ictionary of :urrent "nglish lays do2n the meaning of research as a careful

investigation or in7uiry Redman and +ory define research as a =syste2ti@ed

E##ort to gin ne= (no=ledge6" 8ome people consider research as a

movement from the no2n to the unno2n. )t is actually a voyage of

discovery especially through search for ne2 facts in any branch of no2ledge.

The procedure used to collect information should be one that 2ill result in

information that is both valid and reliable. To help to ac7uire valid and reliable

information there is liely the usage of series of steps. These steps are as

follo2s.

PRIMAR OB?EC!I$ES


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*. To no2 about ris perception of investors

,. To no2 the understanding of B"';L)R;D A)?;?:" in the

traders.

RESEARCH PROBLEM


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+ost investors and traders that fall into the e#perienced category 2ere not

liely to be as technology perceptive as the average young investor and tend

to do their trading via the broerage floor. 8o hard copies of the 7uestionnaire

2ere distributed among investors.

The young investor 2as liely to favor online trading over floor trading thus

necessitating an online survey

SAMPLI9 !ECHI&E<

:onvenience samplingE :onvenience sampling 2as done for the selection.

S20le Pro#ile

ne of the primary aims of the study 2as to focus on real investors as they

2ere more liely to have limited no2ledge about the application of

behavioral theories in decision-maing and hence gullible to psychological

errors. The sample profile 2as created based on t2o judgment criteriaE age of

the respondent and years of investment e#perience in the stoc maret. ;fter

an analysis of the sample the follo2ing groups 2ere found to be optimalE

3i4 "#periencedE )nvestors aged above $( 2ith at least ( years of investing

bacground

3ii4 OoungE )nvestors aged $( or belo2 2ith less than ( years of investing

bacground

&niverse

The universe is the area in 2hich research is to be conducted. )n this research

universe are the traders trading actively in securities maret.

S20le si@e

The sample size consists of G- res0ondents.


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Period o# Study

This research 2as conducted for (< days from +ar 1! th !


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LIMI!A!IOS OF !HE S!&'

This study has suffered from certain limitations lie any other research.

'o2ever these limitations cannot have a drastic impact on the analysis and

the recommendations of the study as these limitations are 2ithin manageable

limits. These limitations are as follo2sE

The main 2eaness of the study is o2ing to the fact that it aims to study

investor behavioral patterns using 7uestionnaires. +aing financial decisions

can be demanding for various reasons that possibly could push many into

maing irrational decisions at one point or the other. 'o2ever 2hile

ans2ering a 7uestionnaire the same individuals are liely to be rela#ed and in

a better frame of mind hence choosing to give ans2ers 2hich may put them

across in different light especially in conte#t of 7uestions 2hich 2ere

presenting hypothetical situations. To overcome this problem to an e#tent

many 7uestions attempted to mae the participants admit mistaes they have

made in the past.

; second limitation arises out of the fact that )ndia is a vast country and this

study cannot be considered an evaluation of the average )ndian investor. )t

remains to be seen 2hether investors in other parts of the 2orld 2ould e#hibit

a similar behavior as 2ould be found out by this study.

The study carried out 2as a time bounded study 2hich 2as not at all enough to

judge the traders on 2hole.

?on- 8ampling errors 2ere present as < respondents refused to fill the

7uestionnaire.

*


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'A!A AALSIS

I!ERPRE!A!IO

,

$nalysis of data is a

process of inspecting,

cleaning, transforming, and

modeling data ith the goal

of discovering useful

information, suggesting

conclusions, and

supporting decision making


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'A!A AALSIS I!ERPRE!A!IO

;nalysis and interpretation forms a major part of any research as in absence of

analysis the data collected have no utility and no interpretation can be made or

inferences can be dra2n.

To analyze the data first of all ) filtered data collected by me through

7uestionnaire. 0uring this process ) found data related to the psychology of the

investors demographic data data related to their trading habits. 8o for maing

any interpretation these data need to be analyzed separately depending upon

the homogeneity.

8o data analysis of this report 2ill be completed in three phases. These are /

.6 To classify the data relation to-

o "#perienced traders

o Ooung traders

,6 To study behavioral factors of both category of traders.

o 0ifference in trading style due to change in psychology.

o 'euristics.

; Testing of hypothesis

8

6


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Phse .


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Phse ,


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,/ %hose *udg2ent nlysis do you trust 2ost =hile 2(ing invest2entsJ

Are7uency %ercent

8elf 1< !


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;/ 'o you consider the 0st 0er#or2nce o# stoc( :e#ore investing in itJ

Are7uency %ercen

t

;l2ays 16 $*H

8ometimes 1* $!H

?ever 1* $!H

To

tal

(< 1


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5/ I# you 2(e huge loss in 0rticulr shre+ =ill you 0re#er trding it

ginJ

Are7uency %ercen

t

Oes 5 16H

8ometimes 1( $


54/105

G/ ou i22editely need 2oney nd hve t=o shres to sell6one hve

gined ten 0ercent nd nother lost ten 0ercent+ =hich one =ill you sellJ

Are7uency %ercen

t

9inning 8hare $( ,


55/105

This is a common psychology of the investors to boo the profits at early stage

on the 2inning shares in the fear of losing the gains and to hold on losing

shares for a longer period of time in the hope of recovery.

7/ In the :ove cse i# the loss is #ive 0ercent then =ill you chnge your

decisionJ

Are7uency %ercen

t

Oes 1! !H

?o $6 ,*H Total (< 1


56/105

t2ice the loss does not mean t2ice the pain. %eople feel more strongly about

the pain from a loss than the pleasure from an e7ual gain.

4/ ou hve 0oor (no=ledge :out Co20ny ’s stoc( nd re there#ore

uncertin :out investing in it6 Suddenly 2ny o# your co8=or(ers nd

co20etitors strt :uying it6 Ho= =ould this ##ect your ttitude to=rds

’J

Are7uency %ercen

t

%ositive $* ,!H

?egative ! H

?o :hange 1! !H

Total (< 1


57/105

I!ERPRE!A!IO8 Herding Bis

;n investor 2ould be e#hibiting 'erding behavior 2hen he relies more on

information validated by a cro2d rather than on his o2n judgment o2ing to

popular perception that the cro2d cannot be 2rong and also due to being 2ary

of probable ridicule 2hich he might face if the cro2d is actually right. )f

investors are heavily influenced by other investors analysts etc. the ability to

come up 2ith their o2n analyses and judgments get hampered. Aor most part

'erding may 2or fine but the upside is limited since 2hen everyone is

thining alie it is 7uite difficult to mae abnormal profits. n the other hand

2hen a do2nside happens it amplifies the psychological biases and can lead

to abnormal losses especially to private investors 2ho are liely to hold on to

losing stocs out of uncertainty due to lac of o2n vie2s hence possibly

ending up seeing information from many sources.

(,


58/105

/ 'o you :elieve it is 0ossi:le to #ind #uture vlue o# shre through

detiled nlysis o# 0st 0er#or2nceJ

Are7uency %ercen

t

;l2ays !6 (*H

8ometimes 1! !H

?ever 1< !


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I!ERPRE!A!IO8 Re0resenttiveness in 'ecisions

)nvestors 2ho rely on Representativeness heuristic tend to become overly

pessimistic about past losers and overly optimistic about past 2inners. )t can

so happen that they 2ill end up considering past returns to be representative of

2hat they can e#pect in the future.

3/ Ho= esy do you thin( it =s to 0redict the coll0se o# SESE in the

=(e o# the 9lo:l Finncil CrisisJ

(5

Are7uency %ercent

Lery "asy $! *H

"asy 11 !!H

0ifficult , 1H

Total (< 1


60/105

Prediction

er% a&%a&%

Dic3l"

I!ERPRE!A!IO8 Hindsight Bis

)t is a common human trait to reflect on past decisions. 9hile analyzing such

decisions many things seem falsely obvious and easily predictable. 9hen

ased 2hether it 2as easy to predict the collapse of 8ense# in the 2ae of the

!


61/105

--

15

2

Perormance

,3"perfor'

$" ar

#erperfor'

I!ERPRE!A!IO- Overcon#idence Bis

)nvestors tend to be consistently overconfident in their ability to outperform

the maret. 8ome of them believe that based on information they have they

are able to predict the future movements of stoc prices better than others are.

../ 'o you #eel you cn+ on verge+ 0redict #uture shre 0rices :etterthn othersJ

Are7uency %ercen

t

;l2ays $6 ,*H

8ometimes 1< !


62/105

-8

102

Predict Better

$lwa%&

So'e"i'e&

(e)er

I!ERPRE!A!IO8 Overcon#idence Bis

)nvestors tend to be consistently overconfident in their ability to outperform

the maret. 8ome of them believe that based on information they have they

are able to predict the future movements of stoc prices better than others

.,/ On scle o# . to G).< lo= ris(/+ =ht levels o# ris( do you undert(eJ

Are7uency %ercen

t

Do2est ris $ *H

Do2 ris 1$ !*H

*!


63/105

;verage ris 1* $!H

'igh ris 11 !!H

'ighest ris , 1H

Total (< 1


64/105

t

0efinitely 1( $


65/105

to abnormal losses especially to private investors 2ho are liely to hold on to

losing stocs out of uncertainty due to lac of o2n vie2s hence possibly

ending up seeing information from many sources.

*(


66/105

.5/ 'o you #i trget 0rice #or :uyingKselling in dvnce )sy+ :e#ore

strt o# trding dy/J

Are7uency %ercen

t

Oes !( (


67/105

can also happen that investors get fi#ed to a price point 2hich may not be

reached thus missing good investment opportunities.

.G/ I# yes+ =hich o# the #ollo=ing criteri =ill you consider to #i the

0riceJ

Are7uency %ercen

t

(! 9ee highMlo2 5 16H

%riceM"arnings Ratio 3%M"4 6 1*H

;verage %rice in recent past 11 !!H

)ssue %rice 6H;dvice from broer 16 $*H

Total (< 1


68/105

.7/ 'o you use sto0 losses in your trdesJ

Are7uency %ercen

t

;l2ays 1! !H

8ometimes * 1!H ?ever $! *H

Total (< 1


69/105

respondents do not use the stop loss orders in their trades. They believe that

their decision is going to be correct every time.

.4/ Ho= did you rect to the ,-- Crisis nd resulting crsh in SESE

Are7uency %ercen

t

8ell off 8hares 5 (


70/105

Regret ;version occurs from the investor’s desire to avoid the pain of regret

arising from a poor investment decision. ;s a result of this investors could

end up holding on to poorly performing shares because avoiding the sale

avoids the recognition of associated loss and in turn of a bad investment.

./ Consider the #ollo=ing sitution< !he Price o# Blue Chi0 shre is Rs

G--6 !his #lls to Rs .-- s result o# crisis6 Anlysts re neutrl nd

give hold signls6 %ill you 0urchse the shre t the ne= lo=+ (ee0ing in

2ind the recent highJ

Are7uency %ercen

tOes 1 !6H

8ometimes 1 !6H

? !! H

Total (< 1


71/105

14

14

22

Buy At Decline

+e&

So'e"i'e&

(,

I!ERPRE!A!IO8 RECEC BIAS

+ost of the respondents 2ill not prefer to buy a share again 2hich has

declined heavily in the recent past. The judgment is done by observing only

the past price action 2hich in some case is unrealistic. ;fter some huge fall a

share may have some gro2th potential.The effect of happenings in the recent past affects the investment decisions of

the respondents and they do not 2ant to trade in losing shares and hence they

cannot apply buy on dips strategy effectively.

.3/ %ht =ill you do i# you re critici@ed #or investing in losing stoc( or

#or selling o## =inning stoc(J

Are7uency %ercen

t

Kustify 0ecision !, (H

Be disappointed 1$ !*H

Re-thin the decision 1< !


72/105

271-

10

Bad Decision

;3&"if% Deci&io

Be #i&appoi"e#

e


73/105

28*

1-

Toss

Hea#&

=ail&

(o preferece

I!ERPRE!A!IO 8 92:lers’ Fllcy Bis

Camblers’ Aallacy bias arises 2hen investors inappropriately predict a stoc

maret outcome lie a trend reversal etc. This may lead them to anticipate the

end of a series of good 3or poor4 maret returns. ;n investor 2ho suffers from

the Camblers’ Aallacy bias is liely to be biased to2ards predicting a reversal

in the trajectory of a stoc.

,./ On scle o# . to G+ ho= =ould you rte your (no=ledge on

reltively ne= #ield =hich studies #inncil decision 2(ing+ clled

Behviorl Finnce )G’ Ecellent + .’ Poor /

,$


74/105

Are7uency %ercen

t

%oor 1$ !*H

Do2 1* $!H

;verage 11 !!H

Cood * 1!H

"#cellent 6H

Total (< 1


75/105

financial theories as obsolete but sees to supplement the theories by rela#ing

on its assumptions on rationality and taing into consideration the premise that

human behavior can be understood better if the effects of cognitive and

psychological biases could be studied in conte#t 2here decisions are made.

,(


76/105

,,- .hile ma#ing a long/term investment0 do youconsider daily trading volumes1

17

-1

2

Considers !olumes

$lwa%&

So'e"i'e&

(e)er

Inter0rettion8 HER' BEHA$IO&R

Trading volumes gives a clue about the li7uidity of the particular security.it

gives the investor an idea that huge number of buyers and sellers are present in

the maret and the pricing of the security is relatively fair. But considering the

trading volumes only gives a visible clue of herd behavior in the trading style

of the investor. Too much increase in volume indicates that the speculators are

more interested in the securities@ it also indicates fresh buying in bul 7uantity.

,*

Are7uency %ercent

;l2ays 1, $H8ometimes $1 *!H

?ever ! H

Total (< 1


77/105

Testing of hypothesis - Chi-squared Test

Ad0ted :y Anne F6 M:en #ro2 (*tatistics for the *ocial *ciences( :y

$ic(i Shr06

The chi-s7uare 3Q!4 test is used to determine 2hether there is a significant

difference bet2een the e#pected fre7uencies and the observed fre7uencies in

one or more categories. 0o the numbers of individuals or objects that fall in

each category differ significantly from the number you 2ould e#pectF )s this

difference bet2een the e#pected and observed due to sampling error or is it a

real differenceF

Chi8SDure !est ReDuire2ents

1. uantitative data.

!. ne or more categories.

$. )ndependent observations.

. ;de7uate sample size 3at least 1


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In#luence O# Invest2ent 'ecision o# Others On O=n 'ecisions

9hile maing a long-term investment daily trading volumes of the share

ideally should not have much 2eight in the decision because high volumes

usually represent speculators and day traders at 2or. The best case in favor of

trading volume should be to select an optimum entry point 2here the sellers

are possibly e#hausted and prices are not liely to drop much further o2ing to

speculation s2ings. %articipants 2ere ased if they consider the trading

volume of a stoc influenced their decision to invest in it. Table sho2s that

only $H of the investors 2ere al2ays checing the trading volume 2hile

maing investment decisions.

*)"DI+2 B)*A!IO&"

AL.A3S SO4)TI4)

S

+)!A" TOTAL

3O&+2

I+!)STO"S

1- 11 2 26

)5P)"I)+C)

D

I+!)STO"S

4 20 0 24

TOTAL 17 -1 2 50

,6


79/105

!hi"#quared $ests

The follo2ing hypotheses 2ere tested

H-< Both investor types are e7ually liely to e#hibit 'erding behavior

H.< "#perienced investors are more liely to e#hibit 'erding behavior as

compared to young investors.

CALC&LA!IOS8

OBSER$E' FRE&ECIES8

*)"DI+2 B)*A!IO&"AL.A3S SO4)TI4)

S

+)!A" TOTAL

3O&+2

I+!)STO"S

1- 11 2 26

)5P)"I)+C)

D

I+!)STO"S

4 20 0 24

TOTAL 17 -1 2 50

T'" e#pected fre7uencies of the both of the group of respondents are

calculated are given belo2 in the given table.

,5


80/105

EPEC!E' FRE&ECIES

*)"DI+2 B)*A!IO&"AL.A3S SO4)TI4)

S

+)!A" TOTAL

3O&+2

I+!)STO"S

8?84 16?12 1?04 26

)5P)"I)+C)

D

I+!)STO"S

8?16 14?88 ?*6 24

TOTAL 50

CALC&LA!IO OF CHI8S&ARE $AL&ES

Clcultion o# N, =ith the hel0 o# MS ecel

!he clculted $lue o# N, 36,3

Therefore degree of freedom S 3r-143c-14 S 3!4 S !

Devel of significance S


81/105

Result+ clculted vlue o# N, is 36,3 t:le vlue i6e6 G633

Since+ ull hy0othesis is re*ected6

&LL HPO!HESIS8 A?F?1T?2

H-< Both investor types are e7ually liely to e#hibit 'erding behavior

AL!ERA!E HPO!HESIS8 $11?3T?2

H.< "#perienced investors are more liely to e#hibit 'erding behavior as

compared to young investors.

Hence in conclusion 2e can say that the e#perience investors are more

resistant to the herding behavior.

61


82/105

FI'I9S

6!

'indings are the

results hich are

obtained by

observations and

analysis of data at

various phases.


83/105

FI'I9S O !HE BASIS OF S!&' CO'&C!E'<

n the basis of mathematical results observations and after support &

consultation from training guide ) found follo2ing facts-

+ost of the respondents prefer to invest in the Darge :ap shares. This behavior

can be understood easily because the Darge :ap shares are 2ell no2n to

investors and the investors have faith in them.

+ost of the respondents believe in media e#perts for their investment

decisions apart from doing their o2n analysis.

+ost of the respondents consider the past performance of a share before

investing in it.

+ost of the respondents 2ill not trade the share again in 2hich they have

made huge losses.

+ost of the respondents hold on loosing share and prefer to sell the 2inning

shares.

+ost of the respondents feel the positive behavior if a share is purchased by

their co /2orers .friends relatives.

+ost of the respondents find it possible to predict the future value of shares.

+ost of the respondents found it difficult to predict the collapse of 8"?8"V.

+ost of the respondents thin that their investment 2ill outperform )?0"V

+ost of the respondents thin that they can predict the future prices of shares

better than others.

6$


84/105

+ost of the respondents 2ant to tae the average ris.

+ost of the respondents fi# the prices in advance before trading them and they

depend upon their broers advice for these decisions.

+ost of the traders do not use stop loss in their trading.

+ost of the traders hold on shares even after they tae huge losses. This is

done in the hope of recovery in the losses.

+ost of the respondents 2ill not buy a share again if it has declined heavily in

recent even after the bullish signals of e#perts.

+ost of the traders use to justify their decisions if the decisions are proven

2rong.

+ost of the traders have some preferences even 2hen 2e toss an unbiased

coin. This preference depends upon the past outcomes.

+ost of the respondents have poor or little no2ledge of B"';L)R;D

A)?;?:".

!he (ey HE&RIS!ICS re s #ollo=s8

&verconfidence is expressed through the results from followingG

1- Based on sills investor feels confident to evaluate securities prices in his

investment portfolio by himself.

!- n the stoc maret investors are confident to select securities better than

other investors.

$- )nvestor feels that he can totally control his investment on the stoc maret.

6


85/105

- )nvestor feels confident in the understanding of the stoc maret.

?xcessive optimism is expressed through the results from following "

1- ;lthough nifty inde# is losing its value investor 2ill continue to increase in

investment on the stoc maret in the ne#t one year.

!- )nvestor believes that the ?ational 8toc "#change is an attractive

investment channel. Then in the ne#t period he 2ill continue to invest in

stoc maret.

$- ;t this time the stoc price is relatively lo2 but investor believes that the

stoc price 2ill increase again in the ne#t time.

- )f )nde# decreases its value by (H tomorro2 investors believe that it 2ill

7uicly recover in the ne#t fe2 days.

/ Herd behavior is expressed through the results from followingG

9hen investor needs to mae decision to buyMsell stocs in a short time

follo2ing other investors’ behavior is fast and certain method. )nformation

from relatives friends and colleagues has high reliability. )nformation about

transactions of foreign investors Recommendations of analysts maret

researchers and stoc broers are highly accurate.

I/ 3sychology of risk is expressed through the results from followingG

1- ; ris- lover investor

!- 9hen stocs’ prices are decreasing@ investor usually holds them longer to

2ait for increasing trend.

6(


86/105

$- )n the maret companies 2hich have prestige or about 2hich investor

no2 more 2ill be raned at the top of his choice.

7/ ?xcessive pessimistic is expressed through the results from followingG

1- There may be the rapid decline in the stoc prices lie in late !


87/105

S&99ES!IOS+

LIMI!A!IOS

COCL&SIOS

6,

This study has suffered

from certain manageable

limitations like any other

research. nder these

limitations some

suggestions are given.These are in support to the

findings. 'inal statement

i.e. conclusion is

summari)ed form of

observations, analysis,


88/105

S&99ES!IOS RECOMME'A!IOS

Suggestions #or Investors

The main suggestion for investors is to mae constant attempts to increase

their a2areness on behavioral finance by educating themselves on the field.

8tudying about the biases and reflecting on their decisions are liely to help

achieve better self-understanding to e#tent and manner to 2hich they gets

influenced by emotions 2hile maing financial decisions under uncertainty.

"ven after satisfactory a2areness is achieved it is highly recommended that

they maintain a chart of the behavioral biases they are liely to be vulnerable

to. This should be revie2ed periodically in order to recollect and refresh their

memory thus giving themselves a better chance to mae improved financial

decisions in the stoc maret. +ost essentially 2hat remains unans2ered is

2hether greater a2areness of investors about behavioral biases is liely to

increase the maret efficiency. ;2areness about behavioral biases and its

application in the course of maing investment decision 2ould be increasing

the rationality of investment decisions thus maing 2ay for higher maret

efficiency.

Reco22endtions #or Econo2icsKFinnce Schools

66


89/105

Behavioral Ainance should be given more importance in the ;cademic

:urriculum if it has not already been given its due. The schools do an

e#cellent job in e7uipping students 2ith no2ledge of the sciences and various

techni7ues 2hich definitely serves as a foundation to a great career. )f they are

e7uipped 2ith e#cellent no2ledge in Behavioral finance the psychological

aspect of the field 2ould have already helped them achieve better self-

understanding and hence decision maing in pressure situation might not be

as challenging to them as it 2ould be other2ise. no2ing 2hat to do is

important but no2ing 2hen to do 2hat is to be done is priceless.

Reco22endtions #or Acde2ics

Behavioral finance as a field brings psychology and finance together. Arom a

research perspective behavioral finance presents a lot of fresh opportunities

and challenges mainly because it is a relatively young field. +oreover it

offers numerous opportunities for creative thining and e#perimental studies

since there is an opportunity to focus on the human mind and its 2ays. The

field is closely related to behavioral economics 2hich focuses on

understanding the rationale behind economic decisions by researching on

various identified cognitive or emotional biases 2hich people may be

suffering from. "ach of these biases can be studied using multiple variables to

add dimensions to the analysis and techni7ues lie Aactor ;nalysis can be

employed to chec for variability among them as they are liely to e#hibit a

high degree of correlation. The 7uestionnaire survey method 2hich 2as the

65


90/105

tool employed to gather data 2as one of the main limitations of this study

albeit the only practical option to reach real investors.

LIMI!A!IOS OF !HE S!&'

This study has suffered from certain limitations lie any other research.

'o2ever these limitations cannot have a drastic impact on the analysis and

the recommendations of the study as these limitations are 2ithin manageable

limits. These limitations are as follo2sE

The main 2eaness of the study is o2ing to the fact that it aims to study

investor behavioral patterns using 7uestionnaires. +aing financial decisions

can be demanding for various reasons that possibly could push many into

maing irrational decisions at one point or the other. 'o2ever 2hile

ans2ering a 7uestionnaire the same individuals are liely to be rela#ed and in

a better frame of mind hence choosing to give ans2ers 2hich may put them

across in different light especially in conte#t of 7uestions 2hich 2ere

presenting hypothetical situations. To overcome this problem to an e#tent

many 7uestions attempted to mae the participants admit mistaes they have

made in the past.

5


91/105

; second limitation arises out of the fact that )ndia is a vast country and this

study cannot be considered an evaluation of the average )ndian investor. )t

remains to be seen 2hether investors in other parts of the 2orld 2ould e#hibit

a similar behavior as 2ould be found out by this study.

The study carried out 2as a time bounded study 2hich 2as not at all enough to

judge the traders on 2hole.

?on- 8ampling errors 2ere present as < respondents refused to fill the

7uestionnaire.

+ethods lie Came Theory and %robabilistic Dogic can be used as inspiration

2hile setting up the premises for a detailed and more advanced study. The

nature of the field promises that a researcher 2ould be presented 2ith many

opportunities to be innovative and creative.

51


92/105

COCL&SIOS

The research found that unlie the classical finance theory suggests

individual investors do not al2ays act rationally 2hile maing investment

decisions. )ndividual investors suffer from several psychological and

emotional biases. These biases play an integral role in an investor’s

decision-maing. 'euristics such as representativeness overconfidence

regret aversion anchoring and mental accounting 3dra2n from the

%rospect theory4 cognitive dissonance and greed and fear all influence

investor’s perception of ris and subse7uently his decision maing. The

findings of the research are that investors display ris-seeing behavior

and avoid selling stocs 2hen faced 2ith loss. They segregate their

investments into separate mental accounts created to meet a specific

investment objective. Their decisions of asset allocation to their

5!


93/105

portfolios are to great e#tent affected by greed and fear. There is

suggestive evidence that these emotional and behavioral factors need to

be incorporated in the investment strategies formulated for individual

investors. )nvestors 2hile taing investment decisions must consider

these biases as ris factor associated 2ith their investment portfolios.

)t is the individual investors 2ho are the most susceptible to behavioral

anomalies and mental errors. They put their life savings into the stoc

marets so as to earn money.

9ith an objective to create investor’s confidence in the stoc marets

behavioral issues are the ne2est of the things 2hich must be considered

2hile formulating investment strategies for individual investors.

This research 2ill help investors judge their attitudes to2ards ris 2ith a

ne2 perspective and in a better 2ay thus leading to better investment

decision maing.

The study found out that investors suffered from all biases in a significant

manner. ;ll the investors 2ere affected by the various biases 2hile maing

investment decisions but it could not be established that one investor group

had suffered more losses under the influence of these biases.

5$


94/105

BIBLIO9RAPH

AE&RE

5

*orks +ited or *orks

+onsulted is stated in this

section. This section

comprises of list of books, articles , and other

sources used by me in this

research report.

nne-ure of this repot

comprises uestionnaire.

http://homeworktips.about.com/od/libraryresearch/a/findarticles.htmhttp://homeworktips.about.com/od/libraryresearch/a/findarticles.htm


95/105

BIBLIO9RAPH

Andersen+ ?orgen $itting. !


96/105


97/105


98/105

Monti+ Mrco and Legren@i+ Polo.!Montier+ ?2es. !

KInIping niversity.

Schr#stein+ 'vid S. and Stein+ ?ere2y C.!


99/105

Schindler+ Mr( . !

Shlei#er+ Andrei. !


100/105

%elch+ Ivo. !


101/105

9- .hat 'rice range o shares do you 'reer to invest

in1

High Cap

Mi# CapLow Cap

,- .hose :udgment analysis do you trust most $hile

ma#ing investments1

Self

Broker/Erie#&

Me#ia/!per" opiio&

;- Do you consider the 'ast 'erormance o a stoc#

beore investing in it1

$lwa%&

So'e"i'e&

(e)er

- In the above case i the loss is ?ve 'ercent then $ill

you change your decision1

+e&(o

1


102/105

@- 3ou have 'oor #no$ledge about Com'any 5s stoc#

and are thereore uncertain about investing in it8

Suddenly many o your co/$or#ers and com'etitors

start buying it8 *o$ $ould this afect your attitudeto$ards 51

o&i"i)e(ega"i)e(o Chage

- Do you believe it is 'ossible to ?nd uture value o ashare through detailed analysis o 'ast 'erormance1$lwa%&So'e"i'e&(e)er

- *o$ easy do you thin# it $as to 'redict the colla'se

o S)+S)5 in the $a#e o the 2lobal inancial Crisis1

er% a&%a&%Dic3l"9E- *o$ do you thin# your investments $ill 'erorm in

com'arison $ith S)+S)51

,3"perfor'$" par#erperfor'99- Do you eel you can0 on average0 'redict uture

share 'rices better than others1

$lwa%&So'e"i'e&(e)er

9,- On a scale o 9 to @F9G lo$ ris#-0 $hat levels o ris#

do you underta#e1

9;- .ould you go ahead and invest in a stoc# i your

valuation o a stoc# is diferent rom that made by a

$ell/#no$n e%'ert on some ?nancial ne$s channel or

ne$s'a'er1

1


103/105

Dei"el%Ma%e(e)er

9


104/105

9- .hat $ill you do i you are criticied or investing

in a losing stoc# or or selling of a $inning stoc#1

;3&"if% Deci&ioBe #i&appoi"e#

e


105/105

AE&RE

:')-8;R" 0)8TR)BT)? T;BD"

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