Title: The impact of behavioural biases on the behaviours of informed and uninformed individual stock investors: case of the Egyptian Stock Exchange

Authors: Laila Gamal; Hayam Wahba

Addresses: Department of Accounting and Finance, University of London Part of the European Universities in Egypt (EUE), Egypt ' Department of Business Administration, Ain Shams University, Egypt

Abstract: Behavioural finance theories study human psychological and emotional biases. Behavioural finance explains the effect of psychological and emotional biases on the financial behaviour of both investors and financial markets. These biases often lead people to make irrational investment decisions. Understanding these biases can help investors to spend their money more rationally and make better-informed decisions. This paper examines the influence of a full array of behavioural biases on Egyptian stock investors' behaviour in the Egyptian stock market. Our research sample is composed of 407 stock investors in Egypt. The research sample was divided into two classes (informed and uninformed stock investors) based on their financial knowledge and skills. Based on the analysis done to the responses collected from an online questionnaire, the findings show that both classes of investors are affected by emotional, cognitive, and behavioural biases. These biases adversely affect their behaviour, leading to irrational stock investment decisions. However, the level of impact varies significantly by the level of financial knowledge.

Keywords: behavioural finance; heuristics; prospect theory; regret aversion bias; loss aversion bias; mental accounting bias; biased; investor decision; behaviour; Egyptian Stock Exchange; ESE; Egypt.

DOI: 10.1504/AAJFA.2025.143504

Afro-Asian Journal of Finance and Accounting, 2025 Vol.15 No.1, pp.117 - 141

Received: 05 Oct 2021
Received in revised form: 01 Nov 2022
Accepted: 27 Jan 2023
Published online: 30 Dec 2024 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article