Cognitive Biases in the Capital Investment Context Theoretical Consi
In today’s competitive business environment, an optimal investment strategy is vital for every company. However, it is often endangered by unconscious mental biases inherent in every human being. Building on findings from cognitive psychology research, Se
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GABLER RESEARCH
Sebastian Serfas
Cognitive Biases in the Capital Investment Context Theoretical Considerations and Empirical Experiments on Violations of Normative Rationality With a foreword by Prof. Dr. Uwe Götze
RESEARCH
Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.
Dissertation Chemnitz University of Technology, Faculty of Economics and Business Administration, 2010
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Foreword It is a well-known matter of fact that successful investment activities are of very high importance both to individual companies as well as to the economy as a whole. Consequently, it is vital for the responsible decision makers to take the ‘right’ decisions, the ones which lead to success. Assuming that rational behavior usually favors the achievement of success, then cognitive biases which violate the principles of rationality are a clear threat to it. The existence of such biases which result from unconsciously applying mental heuristics has repeatedly been demonstrated empirically for financial investments. However, the obviously highly relevant questions whether and how such cognitive biases also affect capital investments, and how they can be tamed, have not been answered yet. The research presented in this book addresses exactly these questions. Based on the current state of knowledge with regard to cognitive biases and investment theory, it analyses theoretically and empirically whether three typical cognitive biases also influence capital investment decisions. The results are unambiguous: the existence of cognitive biases is clearly demonstrated for the anchoring heuristic, framing, and asymmetric dominance, each at a high level of statistical significance – an insight with tremendous importance for the management of investments, which could also benefit from the approaches to deal with heuristics and biases that are subsequently presented by the author. This scientific contribution is based on a comprehensive and thorough analysis of the relevant literature which
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