The Role of Behavioral Finance in Stock Market Decision-Making in Iraq

Abstract

The investigation of behavioral finance examines stock market decision impacts on the Iraqi stock exchange through behavioral financial influences. Studies focusing on behavioral finance which analyzes psychological elements affecting financial choices have gained significant attention during the last few years. Multiple behavioral psychologies unique to emerging markets investment arise before impending investor participation in Iraq alongside over confidence bias and loss aversion and herding behavioral approaches and threat and greed manifestations. The study examines the elements and psychological aspects which shape investor behavior in the Iraqi stock marketplace and evaluates market efficiency together with investor conduct. Through a quantitative method the study examines how cognitive biases along with emotional variables affect investment choices among 143 individual and institutional investors across Iraq. Results derived from the available data prove that cognitive biases particularly overconfidence bias and loss aversion together with emotional factors fear and greed significantly impact stock markets. The influence of biases varies extensively between people who invest individually and organizations that handle funds institutionally. The examined findings enable policymakers as well as investors and financial institutions to develop strategies for minimizing irrational market behavior effects within the stock market thus helping to explain market inefficacies in emerging economic systems.