The role of financial ignorance in behavioral biases An analytical study of a sample of investors in the Iraqi Stock Exchange

Abstract

Financial ignorance has received great research attention at the individual and institutional level because of the cognitive and practical importance of the main economic variables and the main contributors to sound financial management and financial development, and it is one of the most important topics these days. Therefore, one of the most important objectives of this study is to examine the effect of degrees of financial knowledge, financial behavior, and financial attitude on changes in investors' tendencies by measuring the effect on the emotional and cognitive biases of the investor and designing indicators to measure financial ignorance and behavioral biases. The research community was the Iraq Stock Exchange. , 2020 We used a sample of (55) investors, and the study showed a variation in the reactions of investors regarding the dimensions of financial ignorance, but on average, investors showed a reasonable degree of financial intelligence. And that investors are somewhat biased in most paragraphs of behavioral bias, because they are overconfident, that they reach a degree of certainty about their financial decisions, and they hate losing, and that they also suffer from cognitive biases, such as they often make their decisions based on historical information or simulation of others without investigation and research. One of the most important results of this study is the strong relationship between the dimensions of financial literacy and the dimensions of behavioral biases. Increased financial literacy led to a decrease in the overconfidence bias index, which is evidence that investors having high financial literacy contributes to reducing the effects of several biases, including the overconfidence bias.