The influence of behavioural finance biases on South African investors’ life satisfaction

Abstract

The notion of behavioural finance is becoming a reality in the financial and investment industry. Traditional investment theories believed investors make rational investment decisions whereas behavioural finance indicates that investors make irrational investment decisions. Behavioural finance argues that investment decisions are influenced by emotional factors which cause investors to act irrational. In terms of reality, it can be acknowledged that investment behaviour display some attributes found in behavioural finance biases. Different emotions are experienced by investors and these emotions are labelled as behavioural finance biases which cause irrational investment behaviour. The aim of this study was to establish how satisfied South African investors are with their life according to specific behavioural finance biases. From this study, it can be concluded that a significant difference exists between behavioural finance biases for satisfaction with life. Investors subject towards the gambler’s fallacy bias are more satisfied with their lives than investors subject towards regret aversion.

Keywords:Behavioural finance, Investors, Satisfaction with life, Investor behavior