Behavioural portfolio formation using mental accounting in emerging markets: the case of Saudi Arabia. (7th October 2008)

• Record Type: Journal Article
• Authors: Essayyad, Musa; Desai, Khalid
• Is Part Of: International journal of monetary economics and finance. Volume 1:Number 3(2008)
• Page Start: 263
• Page End: 283
• Publication Date: 2008-10-07
• Subjects: assets pyramiding -- behavioural finance -- behavioural portfolio formation -- emerging markets -- portfolio investment -- mental accounting -- modern portfolio theory -- portfolio diversification -- Saudi Arabia investments -- Saudi mutual funds; Monetary policy -- Periodicals; Finance -- Periodicals; Economics -- Mathematical models -- Periodicals; 332.4
• Languages: English
• ISSNs: 1752-0479

Abstract

This paper aims to test whether investors in Saudi Arabia build their portfolios in a layer-by-layer form, considering them as a pyramid of assets as described by Shefrin and Statman (2000), and to investigate whether investors diversify their investments based on their aspirations. We use t-test and regression analysis to test the nine hypotheses related to investors' portfolio-building behaviour. The results show that Saudi investors are influenced by the mental accounting bias and build their portfolios as a pyramid of assets. The results also show that Saudi investors diversify their portfolio investments based on their aspirations and not efficiency.