Behavioural Finance: Investor behaviour during Russia-Ukraine war

Investing is more than just analyzing numbers and making decisions to buy and sell various assets and securities. A large part of investing involves individual behaviour. The aim of this thesis was to identify and examine investor behaviour during the Russia- Ukraine war, especially the behaviour of Finnish investors. Behavioural finance micro is used to investigate and examine irrational investor behaviour and common investor biases. The theory challenges the efficient market theory and attempts to offer an alternative explanation to investor behaviour and market efficiency. While the efficient market theory suggest that investors behave rationally, behavioural finance sees investors as irrational and biased. More specifically, the purpose is to identify relevant psychological biases and investigate their influence on investor decisions. Moreover, the thesis analyzes common investor biases, demographics affecting them, Finnish market reaction to the war and a comparison between Covid-19 investor behaviour and Russia-Ukraine war investor behaviour. The empirical part of the thesis was carried out mainly as a quantitative study, as the aim was to quantify how investor behaviour changes during war. The respondents of the survey were mostly under 30-year-old and Finnish. Qualitative research method was used to strengthen the reliability of the research. The research surveyed investors that invest in any kind of financial assets. Survey questions were based on the theoretical framework. Next, the results of the survey were presented statistically with explanations. Correlation between biases was also presented, and the qualitative data was processed. In conclusion, the study found that familiarity and representativeness biases are strongly experienced during the Russia-Ukraine war. Other biases presented in the thesis were also experienced by the respondents further proving that the Russia-Ukraine war affected investor behaviour. Future suggestions for research are given since investor behaviour during a war is barely studied. However, given the volatile market situation preceding the war it is unclear whether the war amplified or created the investor biases presented in the thesis