What is it about?
Education is an important aspect, which, among other factors, affects significantly investors’ performance and their participation in stock trading. In addition to the academic education, the knowledge gained through real-life experience helps to achieve a higher investment performance. This paper intends to provide understanding on how individual investors can learn about their mistakes in decision-making through the knowledge accumulated from their experiences. Despite mistakes are inherent aspect of the psyche, the model proposed here shows that the investor can learn about them based on his/her own investment experiences (individual learning) and/or the experiences of other investors (social learning). Apart from this, this work provides a methodology to examine the extent of such learning attempts of the investors.
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Why is it important?
The model proposed in this paper provides a comprehensive view of various cognitive, affective, social, and behavioral aspects that play a significant role in the learning behavior of an investors. In addition, unlike agent-based modeling frameworks, it can be operationalized using primary data when examining the magnitude of the learning attempts of the investors.
Perspectives
We believe this paper helps the investors to understand how they can learn about their mistakes, and thereby, pursue appropriate strategies in their investment decisions. On the other hand, academics and practitioners can use this framework to evaluate the extent of the investors' learning behavior so as to assist them in improving such behavior. We expect that such attempts will promote efficient and fair functioning of a stock market and minimize possible unfavorable market conditions such as speculative bubbles and crashes, which eventually enhance the investor participation and the market development.
Aruna Shantha
Rajarata University of Sri Lanka
Read the Original
This page is a summary of: A conceptual framework on individual investors’ learning behavior in the context of stock trading: An integrated perspective, Cogent Economics & Finance, January 2018, Taylor & Francis,
DOI: 10.1080/23322039.2018.1544062.
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