TY - JOUR
T1 - Investigating financial decision-making when facing skewed distributions of return
T2 - A survey study In Vietnam
AU - Phan, Thi Nha Truc
AU - Bertrand, Philippe
AU - Vo, Xuan Vinh
AU - Jones, Kirsten
N1 - Funding Information:
This research is funded by the University of Economics Ho Chi Minh City .
Publisher Copyright:
© 2021
Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.
PY - 2023/2/1
Y1 - 2023/2/1
N2 - This study investigates the relevance of behavioural finance to decision making. Studies suggest that human decision making is not always rational. This paper examines three behavioural financial theories: expected utility, optimal expectation, and cumulative prospect theory, to test financial decision-making when facing skewed distribution in Vietnam. A survey was conducted using lottery tickets, with six questions divided into three pairs. Each pair was aligned with one set of theories, and the questions selected allowed conclusions to be drawn to explain participants' behaviour. The experiment tested 321 people from a variety of age ranges, genders and occupations. Findings show that gender and ages do not significantly impact the decision-making process. However, they explain the preference of participants who appear to be behaving irrationally but do show some rationality when facing the skewed distribution of return. Decision-makers look for all the possible probability payoffs and choose the best outcome with the low-frequency distribution. They follow optimal expectation and cumulative prospect theory ranking the increasing order payoff valued by the parameter and support the cumulative prospect theory set out by Tversky and Kahneman (1992), showing "cognitive biases" and demonstrating that individuals routinely make decisions that contradict reasonable logic The behavioural finance theory is again proven to be crucial. It strongly complements the standard financial theory. Individuals show heuristic behaviour when decision making in random situations especially when facing skewed distribution.
AB - This study investigates the relevance of behavioural finance to decision making. Studies suggest that human decision making is not always rational. This paper examines three behavioural financial theories: expected utility, optimal expectation, and cumulative prospect theory, to test financial decision-making when facing skewed distribution in Vietnam. A survey was conducted using lottery tickets, with six questions divided into three pairs. Each pair was aligned with one set of theories, and the questions selected allowed conclusions to be drawn to explain participants' behaviour. The experiment tested 321 people from a variety of age ranges, genders and occupations. Findings show that gender and ages do not significantly impact the decision-making process. However, they explain the preference of participants who appear to be behaving irrationally but do show some rationality when facing the skewed distribution of return. Decision-makers look for all the possible probability payoffs and choose the best outcome with the low-frequency distribution. They follow optimal expectation and cumulative prospect theory ranking the increasing order payoff valued by the parameter and support the cumulative prospect theory set out by Tversky and Kahneman (1992), showing "cognitive biases" and demonstrating that individuals routinely make decisions that contradict reasonable logic The behavioural finance theory is again proven to be crucial. It strongly complements the standard financial theory. Individuals show heuristic behaviour when decision making in random situations especially when facing skewed distribution.
KW - Financial decision making
KW - skewed distribution of return
KW - Rationality
KW - Skewed distribution of return
KW - Financial decision-making
UR - http://www.scopus.com/inward/record.url?scp=85105446797&partnerID=8YFLogxK
U2 - 10.1016/j.qref.2021.04.015
DO - 10.1016/j.qref.2021.04.015
M3 - Article
VL - 87
SP - 318
EP - 329
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
SN - 1062-9769
ER -