Explaining the Pattern of Psychological Factors in Investors’ Decision-Making in the Tehran Stock Exchange: A Qualitative Approach
Keywords:
behavioral finance, cognitive biases, investment decision, making, grounded theory, Tehran Stock Exchange, herding behavior, investor emotions, multi, level consequencesAbstract
Objective: This study aimed to develop a comprehensive model of psychological factors influencing investors’ decision-making in the Tehran Stock Exchange and to explain the dynamic interactions among cognitive, emotional, social, contextual, and institutional factors.
Methodology: This qualitative study was conducted using Strauss and Corbin’s grounded theory approach. Data were collected through in-depth semi-structured interviews with 23 participants, including active investors, capital market analysts, and portfolio managers in the Tehran Stock Exchange. Participants were selected through purposive and snowball sampling, and data collection continued until theoretical saturation was reached. The interviews were recorded, transcribed verbatim, reviewed repeatedly, and analyzed through open, axial, and selective coding. MAXQDA software was used to manage, organize, and trace the coding process.
Findings: The analysis led to the identification of the core category: “the investment decision-making process under the influence of dynamic interactions among cognitive, emotional, and social factors.” Six main biases, including overconfidence, loss aversion, anchoring, availability bias, confirmation bias, and herding behavior, emerged as causal conditions of biased investment decisions. Financial emotions, prior experience and learning, and macroeconomic-political factors functioned as intervening conditions. Risk perception, financial information transparency, informal information sources, trading technologies, socio-cultural context, and the institutional structure of the Iranian capital market were identified as contextual conditions. The consequences of the model appeared at three levels: financial performance, psychological well-being, and capital market stability. The mean Cohen’s kappa coefficient was 0.80, indicating acceptable to strong coding reliability.
Conclusion: The findings indicated that investors’ decision-making in the Tehran Stock Exchange is not merely the result of rational analysis, but is shaped by the complex interaction of cognitive biases, emotions, social influence, informal information networks, and institutional market conditions. The proposed model can inform behavioral financial literacy programs, information transparency policies, interventions to reduce herding behavior, and psychological or regulatory strategies aimed at improving investment decision-making.
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