Behavioral Biases and Generation Zs Investment Strategies

Abstract

Investing can be an overwhelming endeavor, but Generation Z is taking on the challenge at an increasing degree compared to previous generations. Despite its well-established disadvantages for investors, active investing remains widespread. Active investing refers to the attempt at individual stock picking and market timing. This thesis uses a qualitative approach in the form of interviews with Generation Z investors to analyze how behavioral biases affect their investment approach indirectly. Furthermore, Strauss and Howe’s Generational Theory is used to analyze the contingent factors influencing the investor’s approach to investing. ESG investing and the use of digital platforms have proved to be highly important. Even though the interviewees possess high financial literacy, they showcased high tendencies of overconfidence bias, anchoring bias, loss aversion bias, and recency bias. The thesis concludes that behavioral biases significantly challenge Generation Z’s approach to investing.