The Most Common Behavioural Biases among Young Adults in Bristol, UK and Istanbul

Abstract

According to traditional finance theories, individuals behave rationally and take financial decisions under this rationality. Contrary to traditional finance theories, behavioural finance states that individuals do not always act rationally because they are affected by emotions and feelings. Thus, behavioural finance can be defined as systematic errors that keep individuals away from rationality. The biases might cause unhelpful or even hurtful decisions. Therefore, a high level of behavioural biases might negatively affect the financial well-being of individuals. It is vital to investigate young adults’ financial behaviours as the future of the economies are influenced by their decisions. In this research, behavioural biases among young adults in Bristol, UK and Istanbul, Turkey, was examined to prevent young adults from making irrational financial decisions by identifying the most common behavioural biases. Thus, economies might be robust than today. According to result of this research, young adults have different behavioural biases depending on their culture. The most common biases among young adults in Bristol are over-optimism, anchoring, categorisation, conservatism, and the illusion of control while they are framing, cognitive dissonance, the illusion of knowledge and cue competition among young adults in Istanbul. These common behavioural biases that young adults in Bristol and Istanbul have to lead to many irrational financial decisions. It is not possible to reduce these behavioural biases by direct intervention, and for this, individuals need to be educated. Families may educate young adults about behavioural biases. After that rest of the education about behavioural biases may be given in the schools. Lastly, individuals should be informed about their behavioural biases and possible effects of these biases on their financial well-being.