Evaluating Behavioral Portfolio Theory on investors' purchase decisions at Tehran Stock Exchange

More than 50 years ago Friedman and Savage stated that investors who purchase lottery tickets (risk taking behavior), buy insurance coverage (risk averse behavior) at the same time. They proposed an "S" shape utility function that features concave as loss and convex as winning. Eisenhauer and many other researchers have confirmed risk behavior, as suggested by Friedman and Savage. Shefrin and Statman combined: 1) Prospect Theory of Kahnman & Teversky, 2) Lops' Security, Potential, and Aspiration (SP/A) Theory, and 3) Thaler's Mental Account Theory and presented a new descriptive model that shows investors design their portfolios as layered pyramid consisting of many different layers according to their investment goals and dominant emotions. The objective of this survey research is to trace the presence of layered pyramid of portfolios according to Behavioral Portfolio Theory among the potential investors at Tehran Stock Exchange (TSE). 356 respondents who were chosen through random sampling among the potential investors at TSE have completed a questionnaire. Research data was analyzed with the help of explorative factor analysis. Research findings indicate six main factors that influence Iranian investors' purchase decisions as: "familiarity," "hope," "fear," "optimism," "pessimism," and "aspiration".