Governance of Behavioral Biases in Asset Management Industry: Insights from Fund Managers in Malaysia

This paper presents evidence of behavioral biases among professional investors and discusses the importance of behavioral risk governance in Malaysian asset management industry which represent Asia financial market that is expected to be prone to behavioral biases due to psychological and sociological forces of Asian genetics. Combinationof survey and Delphi methods have been used for data collection (survey) and validation of opinions (Delphi). The analysis revealed supporting evidence that behavioral biases are impacting the thought, decision, and investing strategies of the professional fund managers. Despite awareness on behavioral biases causes and repercussion, theneed to govern behavioral biases in the fund management governance framework has been neglected. This bring challenge to the performance and sustainability of fund management industry. This paper provides insights to the field of behavioral finance and aims to inform researchers, practitioners and regulators on the needs to govern behavioral biases

Keywords:

Behavioral finance , behavioral governance , institutional investors , cognitive heuristics , affective biases , Asian genetic and culture