Original Research

The familiar versus the unfamiliar: Familiarity bias amongst individual investors

Annalien De Vries, Pierre D. Erasmus, Charlene Gerber
Acta Commercii | Vol 17, No 1 | a366 | DOI: https://doi.org/10.4102/ac.v17i1.366 | © 2017 Annalien De Vries, Pierre D. Erasmus, Charlene Gerber | This work is licensed under CC Attribution 4.0
Submitted: 27 November 2015 | Published: 02 February 2017

About the author(s)

Annalien De Vries, Deparment of Business Management, Stellenbosch University, South Africa
Pierre D. Erasmus, Deparment of Business Management, Stellenbosch University, South Africa
Charlene Gerber, Business School, Stellenbosch University, South Africa


Purpose: The purpose of this study was to investigate the existence of familiarity bias amongst individual investors in the South African stock market.
Problem investigated: According to Warren Buffet, one needs to maintain emotional detachment if one wants to be a successful investor. However, recent research indicates that the perceptions of companies’ products and brands may influence individuals’ investment decisions in the stock market. This phenomenon implies that the investment decisions of individual investors are not purely based on firm fundamentals as suggested by traditional finance theories, but might be driven partly by the positive or negative attitude they have towards certain companies’ products and brands. The existence of familiarity bias amongst individual investors was investigated to determine if individuals prefer to invest in companies they are familiar with as opposed to unfamiliar companies.
Methodology: A quantitative approach was followed. An online survey was used to show images of familiar and unfamiliar company brands to respondents, whereafter respondents were asked to indicate whether they will invest in the shares of the identified companies. The statistical analysis entailed descriptive statistics as well as one-way analyses of variance to test the stated hypotheses.
Main findings: The results of this exploratory study indicate that investors do exhibit familiarity bias when choosing between different companies to invest in.
Value of the research: The inclination of individual investors to invest in familiar corporate brands can have implications for the marketing industry, financial markets, the performance of companies as well as the investment performance of individual investors in the sense that it would seem that company brands could have an influence on investment decisions.


familiarity bias; behavioural finance; brand knowledge; investment decisions; South Africa


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Crossref Citations

1. Stakeholders’ engagement in 280 characters: Evidence from JSE-listed companies
George F. Nel, Yadah du Toit
South African Journal of Economic and management Sciences  vol: 26  issue: 1  year: 2023  
doi: 10.4102/sajems.v26i1.4964