Prioritizing and explaining cause and effect relationships of the most important behavioral biases of retail investors in the exchange market: A fuzzy cognitive mapping approach

The first and most important goal of investors in the stock market is to grow their investment portfolio. Meanwhile, behavioral factors emerge as one of the most important factors that prevent optimal decision-making. Many studies have identified and introduced these factors. However, prioritizing these factors and identifying causal relationships between these factors has been neglected. Therefore, this study was conducted to prioritize and explain causal relationships between the most important behavioral biases of retail investors in the Tehran Stock Exchange. Given the qualitative and quantitative nature of the data used in this study, a Fuzzy Cognitive Mapping Approach was used. Therefore, 30 behavioral biases were discussed and examined by 15 experts, and the causal relationships between them were explained and prioritized. Accordingly, the distribution effect biases, the Salience data Bias, and the Loss Aversion Bias were introduced as the most important, and the forgiveness biases, Evolutionary Bias, and Money Illusion Bias were introduced as the least important behavioral biases. Also, behavioral biases were grouped into four categories, which in order of importance are: perceptual, experiential/informational, personality, and emotional.