Measuring behavioral biases in individual investors decision-making and sociodemographic correlations: a systematic review

Abstract

Purpose

This paper aims to identify the impacts of sociodemographic covariates on behavioural biases (BB) scores; the psychometric evidence of the BB measurement instruments; and the main BB that influences the decision-making of individual investors.

Design/methodology/approach

Papers were retrieved through search using keywords in ten databases. This systematic review is based on 69 peer-reviewed papers, most of which were published between 2017 and 2021. The relevance of the included papers was assessed through the analysis of statistical/psychometric methods used, and content analysis of the BB literature and its sociodemographic correlations.

Findings

Overconfidence is higher in men and not related to age. There was no consensus regarding the relationship between BB and other sociodemographic variables. Most measuring instruments are ad hoc, showing ≤ 4 types of psychometric evidence and assessing ≤ 9 BB. Therefore, the findings demonstrate that there is no gold standard instrument for measuring investors’ BB. Furthermore, 37 BB were cited as influencers of individual investors’ decision-making and overconfidence, herding, anchoring, representativeness and loss aversion were the most prevalent.

Research limitations/implications

Considering that very few systematic reviews have been published in the behavioural finance area, this paper highlights the current state-of-the-art and identifies significant gaps in the literature that can be explored by further research.

Originality/value

To the best of the authors’ knowledge, this is the first systematic review that analyses the psychometric properties of instruments used for individual investors BB assessment.