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THE INTERMEDIATION ROLE OF RISK BIAS IN THE EFFECT OF OVERCONFIDENCE ON INVESTMENT PERFORMANCE: A RESEARCH IN BORSA ISTANBUL

S. Aydın,Yusuf Güneysu

Published 2022 in Uluslararası Iktisadi ve Idari Incelemeler Dergisi

ABSTRACT

Traditional financial theories are based on the assumption that investors are rational and choose the one that will give them the highest benefit from possible alternatives. However, behavioral finance states that investors are not completely rational and their decision-making processes are affected by various behavioral factors. The aim of this study is to examine the mediating effect of risk bias in the effect of overconfidence bias of individual investors trading in Borsa Istanbul (BIST) on their investment performance. A questionnaire was chosen as the data collection tool. The questionnaire technique form consists of four parts. In the first part, questions about determining the demographic variables of investors are included. In the second part, a total of 10 questions were asked to individual investors in order to measure the bias of overconfidence. Data were obtained by asking individual investors 6 questions measuring risk bias in the third part and 3 questions measuring investment performance in the fourth part. SPSS was used in the analysis of the data obtained in the study in which 475 individual investors participated. The data were analyzed with the Linear Regression model. As a result of the study, positive significant relationships were found between the overconfidence bias on the investment performance, the overconfidence bias on the risk bias and the risk bias on the investment performance. At the same time, the existence of partial mediation effect of risk bias in the relationship between overconfidence bias and investment performance has also been proven.

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