eThesis - School of Business electronic theses

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The objective of this thesis is to examine the effects of three behavioral biases on investment advisors. These biases are hindsight bias, overconfidence and self-attribution bias. A survey study is carried out to find out how the studied biases affect the investment advisors. The same survey study is also carried out for two control groups for comparative purposes. In addition, the effects of individual thinking style and cognitive abilities on the exposure to behavioral biases are studied.

The data in this study is collected in controlled field surveys. The surveys are carried for three separate groups of people; financial professionals, university students and employees of an engineering company The participants of the surveys answer a questionnaire that contains financial market related estimation tasks.

The main insight of the survey study is the two-pronged structure of the surveys. The ability to recollect answers and repeat the surveys enables the examination of the biases at issue. The biases are studied by comparing observations from different phases of the surveys to each other. Hindsight bias is observed by differences between initial answers and the recollections. Overconfidence is studied using initial answers and realized results. Analyses of self-attribution bias use initial answers from first and second round.

The main finding of this study is that people in general are exposed to the studied behavioral biases but the degree and impact are affected by experience and other characteristics. Investment advisors are generally less exposed to hindsight bias than other people. Moreover, professionals generally outperform other people with lower level of confidence, which indicates lower overconfidence. However, professionals are most exposed to self-attribution bias. The results indicate that in addition to expertise, individual thinking style explains behavioral biases. People with high faith in intuition are more exposed to behavioral biases. Overall, the results of this thesis provide valuable new information on behavioral biases and investment advisors.