Investigating Investors' Mass Behavior in Tehran Stock Exchange: Evidence of Interest Rate and Exchange Rate Fluctuations

Abstract

In behavioral economics, it is assumed that people's behavior is not complete and that there is a possibility of irrational behavior in people's decisions. One of these behavioral biases is known as mass behavior. The present study collected data related to the research with the aim of investigating the effect of interest rate fluctuations and exchange rate changes on the mass behavior of corporate investors. The research method is applied and the statistical method used includes multivariate panel regression pattern. To test the research hypotheses, financial data of statistical sample including 116 companies listed on the Tehran Stock Exchange from 2013 to 2019 and have been collected on a monthly basis. The results showed that there is a positive and significant relationship between mass behavior of investors and rising interest rates; There is also a positive and significant relationship between the mass behavior of investors and rising interest rates in markets with low market index. While no significant relationship was found between the mass behavior of investors and the increase in interest rates in markets with high market index. Also, the findings showed that there was a negative and significant relationship between mass behavior of investors and exchange rate decline in markets with low market index, but there is no significant relationship between mass behavior of investors and exchange rate decline in markets with high market index.

Keywords

• investor mass behavior
• interest rate changes
• exchange rate changes