The Role of Feelings in Investor Decision-Making

37 Pages Posted: 23 Jan 2003

See all articles by Michael M. Dowling

Michael M. Dowling

ESC Rennes School of Business

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Sydney Business School; University of Economics Ho Chi Minh City

Multiple version iconThere are 2 versions of this paper

Date Written: October 2004


This paper surveys the research on the influence of investor feelings on equity pricing, and also develops a theoretical basis with which to understand the emerging findings of this area. The theoretical basis is developed by reference to research in the fields of economic psychology and decision-making. Recent advancements in understanding how feelings affect the general decision-making of individuals, especially under conditions of risk and uncertainty (e.g. Loewenstein et al., 2001), are covered by the review. The theoretical basis is applied to analyse the existing research on investor feelings (e.g. Kamstra, Kramer and Levi, 2000; Hirshleifer and Shumway, 2003). This research can be broadly described as investigating whether variations in feelings that are widely experienced by people influence investor decision-making and, consequently, lead to predictable patterns in equity pricing. The paper concludes by suggesting a number of directions for future empirical and theoretical research.

Keywords: emotions, decision-making, investment, misattribution, image

JEL Classification: G12, G14

Suggested Citation

Dowling, Michael M. and Lucey, Brian M., The Role of Feelings in Investor Decision-Making (October 2004). Available at SSRN: or

Michael M. Dowling (Contact Author)

ESC Rennes School of Business ( email )

Rue Robert d'arbrissel, 2
Rennes, 35000

Brian M. Lucey

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Sydney Business School ( email )

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Sydney, NSW 2006

University of Economics Ho Chi Minh City ( email )

59C Nguyen D├Čnh Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000

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