Article
The mediating effect of the COVID-19 pandemic on heuristic techniques and cognitive.pdf
International Journal of Applied Economics, Finance and Accounting
(2024)
Abstract
US investors’ behavioral finance and investment decision-making approach became a concern during the COVID-19 pandemic era as the capital market crashed. The study used mediation analysis to explain how or why the COVID-19 pandemic intervened in the causal association of behavioral finance concepts of heuristic techniques and cognitive biases on their investment decision-making. This causal research design study was based on 500 snowball-sampled US investors who answered self-constructed, validated, and reliability-tested Likert-scale quantitative variables measured through a first-party data collection approach. The results showed that the COVID-19 pandemic was a specific moderate to partial significant mediator on the low positive significant relationships between heuristic techniques and investment decision-making, and the COVID-19 pandemic was a specific moderate to full significant mediator on the low positive not significant relationships between cognitive biases and investment decision-making among US investors. From the point of view of behavioral finance, the COVID-19 pandemic situation clearly and significantly demonstrated how US investors used 75.6% heuristics techniques (calculated guesses based on prior knowledge) and 87.5% cognitive biases (unintentional errors in their worldview) to cause the crash of the capital market. These findings confirm the rational expectations theory.
Keywords
- Behavioral finance,
- Cognitive biases,
- COVID-19 pandemic,
- Heuristics techniques,
- Investment Decision-Making
Disciplines
Publication Date
Spring February 23, 2024
DOI
https://doi.org/10.33094/ijaefa.v18i2.1400
Citation Information
Peprah, W. K. ., Kwakwah-Oppong, A. ., Osei-Kuffour, F. ., & Evinita, L. L. . (2024). The mediating effect of the COVID-19 pandemic on heuristic techniques and cognitive biases on investment decision-making. International Journal of Applied Economics, Finance and Accounting, 18(2), 351–360. https://doi.org/10.33094/ijaefa.v18i2.1400.