Behavioral Biases in Investment Decisions: A Comparative Analysis of the Stock Market and the Art Market

Abstract

Investment decisions are often influenced by the behavior of the investor. To empirically evaluate, this study aims to comparatively analyze how behavioral biases differ between various investments, in particular, art and stocks. In addition, the research examined the gender differences within the biases for both art and stock investments. Therefore, three objectives were assessed in this paper: 1) To analyze the differences in behavioral biases between stocks and arts, 2) To assess how behavioral biases differ between females and males while investing in art, and 3) To evaluate how behavioral biases differ between females and males while investing in stocks. A detailed quantitative survey was used where participants (n=30), primarily from Singapore, answered 19 questions on the biases based on standardized scales. Data was processed using a paired t-test, Levene's test, and independent t-tests. The findings revealed that the Disposition and Herding biases are significantly greater in the stock investments than in the art ones. However, endowment bias is significantly greater in art as compared to stocks. Lastly, Overconfidence bias did not significantly differ across art and stock assets. Additionally, no significant differences were found in all the behavioral biases tested between males and females. The similarity in gender was consistent across both the Stock investments and the Art investments. In conclusion, this study enables investors to make informed decisions and strategies while investing in art and stocks, considering the effect of behavioral biases.