Reference prices and the effects of mental accounting on investment performance

The present study has been conducted to examine reference price and effects of mental accounting on the portfolio Stock Exchange in Tehran. The researcher evaluated the relationship between the variables of the return of stock, market returns, alpha, sales price and average price through the required collected data. The main issue of this study is ‘mental accounting’ which means the way individuals interpret information to make decisions based on their analysis and the impact of events in their minds which this may violate the general principles of rationality. Mental accounting is a better understanding of ‘psychology of choice’. The author collected the data using information from the Tehran Stock Exchange. The populations of this research were 50 legal customers and 50 real customers which had invested in Tehran Stock Exchange from 1390 to 1391. The data extraction is completely judgmental. Then, the obtained data were analyzed. The results showed that the sales price relates to the average price and investors have more behavioral biases with negative alpha.