Part I: Indentifying investor behavior bias observed in Vietnamese stock market

Michael M. Pompian (2021) has stated that there are more than 100 types of bias having applied by
cognitive science researchers and analysis. Such a huge number of bias, we might have wonder whether
a specific type of bias affect the investors’ behavior, especially in the stock market, or our exchange
bourses which have been assesed and classified into the weak-to-medium form of efficient markets
where some rumors, or adverse information and even objective prejudge and preassumption might
bend the investors’ behaviours and reactions in the other direction, even derail their orginal decision.

First and foremost, the writer will point out some possible investors’ behaviour bias that the writer had
chance to observe in reality. Thanks for the detailed and insightful works of Charles Schwab on
behavioural bias that the writer did partly adopt the result (as in the following figure)

Figure 1.1: Some behaviour bias (Charles Schwab)

From the observation in the Ho Chi Minh Stock Exchange Bourse and Hanoi Stock Exhange Bourse, the
writer has discovered some biasses that influence investors’ decision.

First of all, the Familiarity (Home) bias have influence mostly in the decisions of investor. This is because,
in the view of cognitive science (a discipline that provide a great deal of doctrines to behavioural finance
), our brain tend to process and give decisions toward every arising situation in a manner with better
understanding. This means that, our brain tend to repeat do things that it [our brain] know well or be
familiar with. The more familiy degree is, the more frequent the brain act. Obviously, the bias,
occurred in the dawn of humanity becuae in the early age of civiliaztion, we [human being] have to
encountered with lots of unknown factors in the surrounding environment, for examples, phenomenom
like thunders, earth quake with no knowledge, no technology

Second, the overconfidence has. Alongside with overconfidence is Illusion of knowledge, and Illusion of
choices. The illusion of knowledge occurs when a person have a substaintial amount of knowledge,
experience, he or she tend

Third, the framing effects has also create bias in the behaviour of investor in the stock market. As we all
have known, there are a huge amount of information can affect the performance of the stock market
as well as the perception and decision of the investor. We also known that all of the investors’ decisions
and reactions are decided by the information they received. Thanks for variuos studies and
experiements, we all know that the frame of data that the reciever receives can affect his or her
decisions in After consecutive days of observing, the writer realized that

Furthermore, Barberis, Shleifer, and Vishny (1998) has discussed and proved the impact of a
“conservatism bias” on investors’ decision. The conservatism bias, having clarified by the experiments
conducted by Edwards (1968). According to the experiments of Edwards (1968), conservatism bias show
that investor tend

Barberis, Shleifer, and Vishny (1998) discuss how a “conservatism bias”

might lead investors to underreact to information, giving rise to momentum

profits. The conservatism bias, identified in experiments by Edwards

(1968), suggests that investors tend to underweight new information when

they update their priors. If investors act in this way, prices are slow to in-

corporate new information, but once prices fully incorporate information,

there is no further predictability in stock returns.

Part II: Recent studies on overconfidence and its effect on investors’ decisions