Role of Behavioral Finance In Understanding Individual Investor's Behavior (A Review of Empirical Evidences from Tehran Stock Exchange)

In paradigm of behavioral finance, the prevalent Assumption of viewing human being as rational entity who is always satisfied in optimizing his/her benefits is questionable. The advocates of Behavioral finance knowledge strongly believe that awareness of psycho-cognitive" tendencies in investment realm is absolutely essential and it requires serious improvement in terms of expanding the scope of studies. However academicians and professionals who are advocates of classic financial school do not believe in examining behavioral aspects of human and its impact on financial decisions as an independent field of studies, yet both quantitative and qualitative advancement of experimental studies within this field indicates the importance of research on behaviors in financial markets. The aim of this study is to identify influential factors on individual investor's decision making and also identifying behavioral biases, through a comprehensive review of conducted studies in Iran and comparing it with the result of studies from other countries. The finding of this study shows that domestic and foreign studies have identified similar effective factors such as financial ratios, recommendations, behavioral biases and etc. Also the effect of demographic factors on investors' behavior has been not studied in Tehran stock exchange so far.