Survey Evidence on Core Factors of Behavioral Biases: The Role of Cognition and Affect

33 Pages Posted: 3 Sep 2020

See all articles by Marc Oliver Rieger

Marc Oliver Rieger

University of Trier

Mei Wang

WHU - Otto Beisheim School of Management

Po-Kai Huang

Aletheia University

Yuan-Lin Emma Hsu

National Chengchi University (NCCU)

Date Written: July 24, 2020

Abstract

In the past decades, a multitude of judgmental and behavioral biases with regards to financial decision making has been found. But are these biases connected with each other? Are people prone to, e.g., illusion of control, usually also more prone to confirmation or hindsight bias? In this study we show that nine common biases can indeed be reduced to only three main factors. These three factors can be related to biases in self-related and non-self-related information processing and in the connection between those. We also show that cognitive reflection decreases biases related to external, while emotions can increase biases related to internal information processing.

Keywords: investment behavior, behavioral decision making, psychological biases, emotional state measures, cognitive strategies

JEL Classification: D91, D81, D83

Suggested Citation

Rieger, Marc Oliver and Wang, Mei and Huang, Po-Kai and Hsu, Yuan-Lin Emma, Survey Evidence on Core Factors of Behavioral Biases: The Role of Cognition and Affect (July 24, 2020). Available at SSRN: https://ssrn.com/abstract=3660308 or http://dx.doi.org/10.2139/ssrn.3660308

Marc Oliver Rieger

University of Trier ( email )

15, Universitaetsring
Trier, 54286
Germany

HOME PAGE: http://www.banking-finance.uni-trier.de

Mei Wang

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallender, 56179
Germany

Po-Kai Huang

Aletheia University ( email )

No.32, Zhenli St.,
Danshui Dist.
New Taipei City, 25103
Taiwan

Yuan-Lin Emma Hsu (Contact Author)

National Chengchi University (NCCU) ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan

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