Modeling the Behavior of Individual Investors in the Stock Market Based on the Neuro-Finance Approach

Document Type : Original Article


1 Ph.D. student in Finance, Faculty of Management and Economics, Science and Research, Tehran, Iran

2 Assistant Professor, Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran

3 Assistant Professor, Department Of Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran

4 Assistant Professor, Department Of Psychology, Research Sciences Branch, Islamic Azad University, Tehran, Iran


The present study aims to provide a model to explain individual investors' behavior in the stock market using the neuro finance approach. The research was applied and performed qualitatively with the grounded theory technique. Data were collected through semi-structured interviews, and theoretical sampling continued until the saturation of categories. Fifteen depositors were interviewed. Then, the individual investors' behavior was presented based on neurological and psychological factors based on Strauss and Corbin's systematic approach theories in open coding, axial coding, and selective coding steps. Finally, the developed theory's validity was examined. The results showed that the model's core category is the individual investors' behavior. Generally, the causal conditions affecting the investors' behavior fall into two main groups in the same contextual and involved conditions. Neurological and psychological factors, which include 19 categories, are among the essential categories, among which ten categories have the highest weight and importance. These categories include changes in the physical and mental state during the intellectual transaction, emotional behavior, sense of security in the investment climate, sensitivity to news, anxiety, peace and focus, expectations and degree of risk-taking, leisure and holidays, and hours of transactions. The second group is demographic factors, which include five categories, among which two categories have been significant, i.e., individual knowledge and number of years of presence in the stock market. The model solution was the stock exchange organization. Finally, the economic consequences of the investors' behavior were discussed as the model's last part.


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