The relationship between emotional biases and investment decisions: a meta-analysis

Abstract

PurposeThe study attempts to investigate the relationship between emotional biases (loss aversion bias, overconfidence bias, and regret aversion bias) and investment decisions through a meta-analysis approach.Design/methodology/approachA meta-correlation analysis was done using sample size and correlation (r) data from several relevant studies that look at how emotional biases (loss aversion bias, regret aversion bias, and overconfidence bias) affect investment decisions. Additionally, beta coefficients (ß) were also converted to correlation coefficients (r) from six studies.FindingsThis study analysed 31 empirical studies and found a significant positive correlation between emotional biases and investment decisions [loss aversion bias (r = 0.492), regret aversion bias (r = 0.401), and overconfidence bias (r = 0.346)]. We set the statistical significance threshold at 0.05.Research limitations/implicationsThe review covered 31 online research publications that showed significant heterogeneity, possibly influenced by various methodological, population, or other factors. Furthermore, the use of correlational data restricts the ability to establish causation.Originality/valueThis is a novel attempt to integrate the results of various studies through meta-analysis on the relation between these emotional biases (loss aversion, overconfidence, and regret aversion) and investment decisions.