Theory os Behavioral finance and its impact on the volume of people investing in Tehran Stock Exchange

The modern financial theory, whose focus was on the two main paradigms of rational behavior of economic factors and efficient market theory, was dominant on financial markets for more than two years. But the existence of some experimental evidences such as market exceptions which could not be explained through common models of efficient theory paved the way for emergence of a theory named behavioral financial theory. Behavioral financial theory is consisting of wide ranges of psychological and sociological aspects which are in deep contradiction with efficient market theory.The investors’ idea of having perfect rational behavior cannot justify their behavior in the money market sufficiently. The existence of many psychological factors makes people not to decide on their investments in a perfect rational way.In this research, first of all, we introduced behavioral financial theory and then studied psychological factors which are effective on the volume of people’s investments.This research is an applied one and considering its kind and nature, the objectives and questions are descriptive.The way through which data is analyzed is regression.4 psychological factors, which could take effect on the volume of people’s investments, were recognized and then based on these factors a questionnaire was designed in two parts using variables to include in research deals.The obtained results state that the volume of investments has a direct relation with people’s self-confidence and on the other hand it is in the opposite direction with people’s rationality. Finally, we extract a model with using the results.