The Impact of Status Quo Bias on Investment Decisions

Research Article
Open access

The Impact of Status Quo Bias on Investment Decisions

Mengran Xiang 1*
  • 1 University of Toronto Mississauga    
  • *corresponding author mengran.xiang@mail.utoronto.ca
Published on 10 November 2023 | https://doi.org/10.54254/2754-1169/36/20231798
AEMPS Vol.36
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-83558-093-6
ISBN (Online): 978-1-83558-094-3

Abstract

Different environments can create different biases in the current situation, such as people from different countries having different stereotypes about the same thing, which can also affect investment. This paper takes stocks investment as an example to explore the impact of current situation bias on investment decisions. This paper’s goal is to demonstrate through different experiments how status quo bias arises from both subjective and objective factors, and how it affects investment. This paper analyzes two experiments to demonstrate how investment decisions are specifically influenced. The first is to use the manifestation of stocks themselves to generate status quo bias, and the second is caused by people's objective factors. The second is to address the differences between investments by analyzing the problems faced by different individuals. This paper also provides a solution to the problem, starting from the stock itself, by reducing the learning cost and difficulty of investing in stocks to help people better invest.

Keywords:

investment decision, status quo bias, gender difference

Xiang,M. (2023). The Impact of Status Quo Bias on Investment Decisions. Advances in Economics, Management and Political Sciences,36,138-143.
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References

[1]. Samuelson, W., Zeckhauser, R.: Status quo bias in decision making. Journal of risk and uncertainty, 1, 7-59 (1988).

[2]. Rubaltelli, E., Rubichi, S., Savadori, L., Tedeschi, M., Ferretti, R.: Numerical Information Format and Investment Decisions: Implications for the Disposition Effect and the Status Quo Bias. The Journal of Behavioral Finance, 6(1), 19–26 (2005).

[3]. Gigerenzer, G., Hoffrage, U.: How to Improve Bayesian Reasoning without Instruction: Frequency Formats. Psychological Review, 102, pp. 684–704 (1995).

[4]. Jain, T. N.: Alternative methods of accounting and decision making: A psycho-linguistical analysis. The Accounting Review, 48(1), 95-104 (1973).

[5]. Montalto, C. P., Sung, J.: Multiple imputation in the 1992 Survey of Consumer Finances. Financial Counseling and Planning, 7, 133-146 (1996).

[6]. Adisa, T. A., Abdulraheem, I., Isiaka, S. B.: Patriarchal hegemony: Investigating the impact of patriarchy on women’s work-life balance. Gender in Management, 34(1), 19–33. (2019).

[7]. Embrey, L., Fox, J.: Gender differences in the investment decision-making process. Financial Counseling and Planning, 8(2), 33-40 (1997).

[8]. Adrian, T., Rosenberg, J.: Stock Returns and Volatility: Pricing the Short-Run and Long-Run Components of Market Risk. The Journal of Finance (New York), 63(6), 2997–3030. (2008).

[9]. Hogan, C. E., Lewis, C. M.: Long-Run Investment Decisions, Operating Performance, and Shareholder Value Creation of Firms Adopting Compensation Plans Based on Economic Profits. The Journal of Financial and Quantitative Analysis, 40(4), 721–745 (2005).

[10]. Baker, H. K., Ricciardi, V.: How biases affect investor behaviour. The European Financial Review, 7-10. (2014).

[11]. Seawright, R.P.: Investors’ 10 Most Common Behavioral Biases., http://rpseawright.wordpress.com, last accessed 2023/04/16 (2012).


Cite this article

Xiang,M. (2023). The Impact of Status Quo Bias on Investment Decisions. Advances in Economics, Management and Political Sciences,36,138-143.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 7th International Conference on Economic Management and Green Development

ISBN:978-1-83558-093-6(Print) / 978-1-83558-094-3(Online)
Editor:Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.36
ISSN:2754-1169(Print) / 2754-1177(Online)

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References

[1]. Samuelson, W., Zeckhauser, R.: Status quo bias in decision making. Journal of risk and uncertainty, 1, 7-59 (1988).

[2]. Rubaltelli, E., Rubichi, S., Savadori, L., Tedeschi, M., Ferretti, R.: Numerical Information Format and Investment Decisions: Implications for the Disposition Effect and the Status Quo Bias. The Journal of Behavioral Finance, 6(1), 19–26 (2005).

[3]. Gigerenzer, G., Hoffrage, U.: How to Improve Bayesian Reasoning without Instruction: Frequency Formats. Psychological Review, 102, pp. 684–704 (1995).

[4]. Jain, T. N.: Alternative methods of accounting and decision making: A psycho-linguistical analysis. The Accounting Review, 48(1), 95-104 (1973).

[5]. Montalto, C. P., Sung, J.: Multiple imputation in the 1992 Survey of Consumer Finances. Financial Counseling and Planning, 7, 133-146 (1996).

[6]. Adisa, T. A., Abdulraheem, I., Isiaka, S. B.: Patriarchal hegemony: Investigating the impact of patriarchy on women’s work-life balance. Gender in Management, 34(1), 19–33. (2019).

[7]. Embrey, L., Fox, J.: Gender differences in the investment decision-making process. Financial Counseling and Planning, 8(2), 33-40 (1997).

[8]. Adrian, T., Rosenberg, J.: Stock Returns and Volatility: Pricing the Short-Run and Long-Run Components of Market Risk. The Journal of Finance (New York), 63(6), 2997–3030. (2008).

[9]. Hogan, C. E., Lewis, C. M.: Long-Run Investment Decisions, Operating Performance, and Shareholder Value Creation of Firms Adopting Compensation Plans Based on Economic Profits. The Journal of Financial and Quantitative Analysis, 40(4), 721–745 (2005).

[10]. Baker, H. K., Ricciardi, V.: How biases affect investor behaviour. The European Financial Review, 7-10. (2014).

[11]. Seawright, R.P.: Investors’ 10 Most Common Behavioral Biases., http://rpseawright.wordpress.com, last accessed 2023/04/16 (2012).