Psychological factors on irrational financial decision making

Abstract

Purpose – This research aims to explore and explain the determinants of irrational financial decision
\nmaking, especially the day-of-the week anomaly, by using psychological approach.
\nDesign/methodology/approach – As it is a conceptual paper, this research explores the
\npsychological biases literature and links it to the day-of-the week anomaly. Using Ellis’ ABC
\n(Activating Event, Belief, and Consequences) Model, the authors survey and classify the stimulant as
\nthe occasion that stimulates the psychological biases of investors, and these psychological biases will
\nbring a consequence in behaviour which is irrationality in weekend effect.
\nFindings – Adopting Ellis’ ABC model, the paper constructs a theoretical framework that link the
\npsychological biases and day-of-the week anomaly. The theoretical model is also given as a proposed
\nmodel for future empirical research.
\nResearch limitations/implications – This paper contributes to research by giving the theoretical
\nmodel and its framework. The latter, future research can examine the proposed psychological biases as
\nthe determinant of day-of-the week anomaly empirically.
\nOriginality/value – This paper conceptually builds a framework and derives a proposed equation
\nmodel linking the psychological biases (weather, moon, attention bias, heuristic bias, regret, and
\ncognitive bias) to the day-of-the week anomaly.