Institutional investor behavioral biases

What is it about?

This paper provides two insights. First, it proposes an alternative theoretical underpinning through theoretical triangulation of psychological, sociological and biological perspectives in understanding the origin, causes and effects of institutional investor irrational behaviors. Second, it draws a conceptual framework based on syntheses of theories and empirical evidence in understanding the origin of institutional investors’ irrational behaviors, their influence on irrational investment management strategies, and impact on fund investment performance.

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Why is it important?

Investor irrational behavior is real and its effects to financial and economic systems are pervasive if no efforts are taken to acknowledge and mitigate them. Despite its significance, the theoretical underpinning of irrational behavior remains vague and this has been neglected in academic, practice and policy discourse.