Behavioral finance and its implications in the stock market

Kamran Safarli

Master's thesis

Abstract:

Cryptocurrencies took one of the leading role in modern trading market as the tool for investment and trading all around the world. This research of the thesis investigates and determines the different reasons of motivation and incentives of investing to the cryptocurrencies, the differences between real and expected income of investors and the key reasons of financial loses during trading and investment to cryptocurrencies. The research is based in survey with 182 respondents respectively that were collected online. The study is motivated to investigate the current situation with traders‘ activity of investment, find critical points and main related factors that affect behavior and decision making process, inform other traders or people who want to start their first investment about the common problems that could be visible during their activity. 6 socio-demographic and 13 other related questions were selected for better and proper analysis. The findings of the study reveal that desire to earn some additional money and just trying to see how the trading works are the key motivations for beginning of trading, and people face more with losses that profits. Study also reveals that overconfidence, disuse of economic calendar, incorrect evaluation of risk, fear to lose money and disproportional distribution of assets prices are among the key reasons of financial losses during trading and investment to cryptocurrencies. The study could be used by traders and related parties as the starting point for the next similar studies and analyses.

Abstract:

Cryptocurrencies took one of the leading role in modern trading market as the tool for investment and trading all around the world. This research of the thesis investigates and determines the different reasons of motivation and incentives of investing to the cryptocurrencies, the differences between real and expected income of investors and the key reasons of financial loses during trading and investment to cryptocurrencies. The research is based in survey with 182 respondents respectively that were collected online. The study is motivated to investigate the current situation with traders‘ activity of investment, find critical points and main related factors that affect behavior and decision making process, inform other traders or people who want to start their first investment about the common problems that could be visible during their activity. 6 socio-demographic and 13 other related questions were selected for better and proper analysis. The findings of the study reveal that desire to earn some additional money and just trying to see how the trading works are the key motivations for beginning of trading, and people face more with losses that profits. Study also reveals that overconfidence, disuse of economic calendar, incorrect evaluation of risk, fear to lose money and disproportional distribution of assets prices are among the key reasons of financial losses during trading and investment to cryptocurrencies. The study could be used by traders and related parties as the starting point for the next similar studies and analyses.

Keywords

Behavioral finance, cryptocurrency, investment, traders, losses, trading.

Language used: English

Date on which the thesis was submitted / produced: 12. 4. 2022

Thesis defence

• Date of defence: 15. 6. 2022
• Supervisor: Ing. Petr Mach, Ph.D.
• Reader: Ing. Hana Lipovská, Ph.D.

University of Finance and Administration

Master programme / field:
Economics and Management / Economics and Management