Behavioural portfolio formation using mental accounting in emerging markets: the case of Saudi Arabia
by Musa Essayyad, Khalid Desai
International Journal of Monetary Economics and Finance (IJMEF), Vol. 1, No. 3, 2008

Abstract: This paper aims to test whether investors in Saudi Arabia build their portfolios in a layer-by-layer form, considering them as a pyramid of assets as described by Shefrin and Statman (2000), and to investigate whether investors diversify their investments based on their aspirations. We use t-test and regression analysis to test the nine hypotheses related to investors' portfolio-building behaviour. The results show that Saudi investors are influenced by the mental accounting bias and build their portfolios as a pyramid of assets. The results also show that Saudi investors diversify their portfolio investments based on their aspirations and not efficiency.

Online publication date: Mon, 06-Oct-2008

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