The Impact of Cognitive Ability and Faith in Intuition on Investors' Trading Strategies and Performance of Perfesional Investors in Tehran Securities Exchange

Document Type : Original Article

Authors

1 Assistant Prof, Department of Financial Management and Insurance, Shahid Beheshti University, Tehran, Iran

2 Assistant Prof, Department of Financial Management and Insurance, Shahid Beheshti University, Tehran, Iran.

3 Ph.D. Candidate in Fianacial Management, Shahid Beheshti University, Tehran, Iran.

Abstract

The aim of this study is to explain the relationship between cognitive abilities and faith in intuition with trading strategies and performance of professional investors in Tehran Stock Exchange. To this end, we examine the components of cognitive ability and faith in intuition on active / passive (buy and hold) and portfolio diversification / concentration strategies as well as the performance of investors. The sample consists of 310 professional investors including 160 traders and 150 analysts in the capital market whose data were collected via questionnaires. Logistic regression and ordinary least squares were used to analyze the data. The results show that for traders, high faith in intuition is associated with more active trading, and higher cognitive ability results in more concentrated portfolios. Moreover, higher cognitive ability has a positive and significant effect on traders’ performance, while higher faith in intuitionhas a negative and significant effect on their performance. The results are somewhat different for analysts, as their portfolios become more diverse with their age, while faith in intuition leads to a more concentrated portfolio. However, analysts’ intuition, like traders, is negatively and significantly correlated with performance.

Keywords

References

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Financial Management Perspective
Volume 9, Issue 28 - Serial Number 28
December 2019
Pages 143-164

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