Lithuanian investor behaviour: manifestations of irrationality

Straipsnyje nagrinėjama palyginti neseniai pradėta svarstyti, tačiau po praeitą dešimtmetį finansų rinkas užklupusių krizių vis daugiau diskusijų kelianti investuotojų iracionalumo problema. Nors tradicinės ekonomikos ir investicijų valdymo teorijos tebesiremia vadinamąja homo economicus koncepcija, numatančia, kad rinkos dalyviai yra absoliučiai racionalūs, daugėjant realios investuotojų elgsenos tyrimų ši nuostata kelia vis daugiau abejonių. Straipsnyje pateikiama investuotojų iracionalumo sampratos formavimąsi atskleidžiančios literatūros apžvalga ir, remiantis anketinės apklausos rezultatais, nagrinėjama, kiek iracionalumo apraiškos būdingos šalies investuotojams.Modern portfolio theory is based on the main assumption that all investors are rational and all their decisions are directed to maximize economic benefits. This theory assumes that all financial decisions of market participants are always oriented towards maximum return and that market participants always try to minimize exposure to risk. It is also claimed that investors are always trying to maximize this risk/reward ratio using all available information and in-depth analysis of all possible alternatives. Thus it should also mean that personal investment expectations and goals of market participants should also be rational. However, as many studies show, this assumption is far from reality and some authors even argue that systemic irrationality is one of the main factors influencing well documented investors’ long-term underperformance. So, in search of ways how to improve the investment climate and help investors achieve better overall investment performance, it is important to study their financial behaviour, where identifying unreal expectations and other irrationality factors could be an important step in pursuing this objective. In this paper, the results of the Lithuanian investors’ survey, which was performed using a virtual questionnaire platform, are examined. Special attention is paid to determining what part of surveyed investors potentially have irrational investment expectations and are subject to key cognitive biases that might indicate irrationality manifestations. By looking into the expectations area, we can conclude that surveyed investors are dominated by moderate investors, who expect a 4–8 per cent annual return on their investments. Attention must be paid to the fact that more than a quarter of investors expect to generate a 12 per cent or higher annual return, which is a much higher rate than studies with investors’ real returns suggest. Analysis of some key irrationality-causing cognitive biases also showed that a significant part of surveyed investors exhibit signs of imperfect rationality. It is interesting that, based on the research findings, we can also state that a significant part of surveyed participants, in evaluating their opinions about personal investment performance, show signs of pessimism. We also conclude that more than half of surveyed investors might be affected by the illusion of control