The familiar versus the unfamiliar: Familiarity bias amongst individual investors

Annalien de Vries · Pierre D. Erasmus · Charlene Gerber

55 citations0/0 files storedActa Commercii

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Financial Markets and Investment Strategies Decision-Making and Behavioral Economics Financial Literacy and Behavior

Abstract

Purpose: The purpose of this study was to investigate the existence of familiarity bias amongst individual investors in the South African stock market. Problem investigated: According to Warren Buffet, one needs to maintain emotional detachment if one wants to be a successful investor. However, recent research indicates that the perceptions of companies’ products and brands may influence individuals’ investment decisions in the stock market. This phenomenon implies that the investment decisions of individual investors are not purely based on firm fundamentals as suggested by traditional finance theories, but might be driven partly by the positive or negative attitude they have towards certain companies’ products and brands. The existence of familiarity bias amongst individual investors was investigated to determine if individuals prefer to invest in companies they are familiar with as opposed to unfamiliar companies. Methodology: A quantitative approach was followed. An online survey was used to show images of familiar and unfamiliar company brands to respondents, whereafter respondents were asked to indicate whether they will invest in the shares of the identified companies. The statistical analysis entailed descriptive statistics as well as one-way analyses of variance to test the stated hypotheses. Main findings: The results of this exploratory study indicate that investors do exhibit familiarity bias when choosing between different companies to invest in. Value of the research: The inclination of individual investors to invest in familiar corporate brands can have implications for the marketing industry, financial markets, the performance of companies as well as the investment performance of individual investors in the sense that it would seem that company brands could have an influence on investment decisions.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 55 citations exist upstream.

References

1979Prospect Theory: An Analysis of Decision under Risk 1993Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency 2001Boys will be Boys: Gender, Overconfidence, and Common Stock Investment 1985Mental Accounting and Consumer Choice 2000Strategic Brand Management: Building, Measuring, and Managing Brand Equity.1987Further Evidence On Investor Overreaction and Stock Market Seasonality 1992The impact of institutional trading on stock prices 2013Handbook of the Economics of Finance

Cited by

2019Family presence, family firm reputation and perceived financial performance: Empirical evidence from the Philippines 2023Does SME’s financing decisions follow pecking order pattern? The role of financial literacy, risk preference, and home bias in SME financing decisions 2018The perceived influence of relationship quality on brand loyalty 2021An empirical analysis of SMES’ triple bottom line practices 2021Premium versus affordable clothing retailers: what are customer expectations for satisfaction and repurchase intentions?

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.