The Pursuit of Rationality : Investigating Psychological Biases Among Swedish Retail Investors

Sammanfattning

This thesis studies how the psychological biases of overconfidence, herd behavior and the disposition effect have an effect on retail investors, and what demographic factors as well as investment experience, had an effect on the regression. To answer the question, a survey was utilized to retrieve primary data from retail investors. In total, 154 usable answers were retrieved from 3 online forums. Afterwards, the data was reorganized in excel and analyzed in the program SPSS through multiple tests and OLS regressions. A regression was created for each bias, where the independent variables were gender, age, marital status, education, income and investment experience. The analysis showed that there was a lack of evidence in the presence of group overconfidence and the disposition effect, at the same time as there seemed to be no presence of herd behavior in the group. The linear regressions that were performed afterwards, show edevidence that increased investor experience led to an increase in overconfidence, as well as being a man. The regression for herd behavior was shown to have only statistically insignificant variables, but a majority of the variables at least seemed to be negatively correlated with herd behavior. Increased investment experience led to a decrease in the presence of the disposition effect and being married led to a larger decrease in the affinity towards the bias. Finally, it was concluded that further research was required with similar variables to be able to determine if there is evidence of eventual correlations. Keywords: Behavioral finance, overconfidence, herd behavior, the disposition effect,demographics, investor.