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Behavioral Finance and the Investment Decision-Making Process in the Brazilian Financial Market

2007; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.960350

1556-5068

Roberto Frota Décourt, André Accorsi, J.M. Pinheiro Neto,

Financial Reporting and Valuation Research

This article shows investment simulations with Brazilian MBA students and physicians, indicating that the process of making investment decisions is based on the "Behavioral Economics" theory which uses the fundamental aspects of the Prospect Theory developed by Kahneman and Tversky (1979). The following effects have been tested and identified using an investment simulator over the Internet. 1) endowment, that makes the participants not to sell the received assets, no matter if better investment options are available; 2) the disposition effect, that refers to the pattern that people avoid realizing paper losses and seek to realize gains; 3) fear of regret, that makes the participant invest in rejected assets in the past that had good valorization and 4) framing, that modifies the investment decision depending on the perspective given to the problem. The conclusions of this study were: 1) the endowment was effective for physicians; 2) the disposition did not affect the participants; 3) the fear of regret influenced the decisions of MBA students and 4) the framing modified the investment decision of the physicians and MBA students.