Purpose – This study explores how Egyptian investor loss aversion affects the Egyptian stock market performance.
Design/methodology/approach – The research employed an empirical approach by collecting secondary data from the Egyptian Stock Market between January 2004 and December 2021. To achieve this, the study formulated one hypothesis and utilized the empirical multiple regression model. Additionally, the researcher employed the Granger Causality (GC) technique to identify the bidirectional relationships between the two time-series of the research.
Findings/originality/value – The investigative results affirm the validity of the main hypothesis. Additionally, they demonstrate that there is only a one-way effect from investor loss aversion to performance.
Future suggestions/recommendations – The research recommends future investigations to explore diverse behavioral factors and their influence on Egypt's stock market performance, directly or indirectly through mediators. Suggestions include using alternative metrics, narrowing research focus, and evaluating performance using profitability ratios like ROA and ROE via panel data analysis. Enhancements could involve integrating additional control variables. The study proposes incorporating major political, economic events, and ongoing geopolitical conflicts into empirical research. Researchers are encouraged to use an event study approach to illustrate how behavioral factors, particularly loss aversion, deviate from theoretical expectations in response to specific events.