Dynamics of the Behavior of Individual Investors in Tehran Stock Exchange

The aim of this study is to investigate the behavior of individual investors from the perspective of behavioral errors and relationship between them in Tehran Stock Exchange. For this purpose, we examined the portfolio statement of individual and institutional investors during a five-year period from 2012 to 2016. The result show that individual investors make poor trading decisions: stocks they purchase underperform those they sell. On the other hand, both individual investors tend to sell stocks that have appreciated in price, but not those that have depreciated in price (consistent with a disposition effect). Finally, they appear to believe that past returns are indicative of future returns (a representativeness bias). In the following, the analysis of multiple cognitive errors is done to determine whether investors with a cognitive error are prone to other cognitive errors. The results indicate that the behavior of some investors represents more than one cognitive error.