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"The time I spent as a PhD student is remembered as some of the most wonderful years of my life".

Many of us make decisions, both wise and unwise, that are driven by emotion.

Psychology labels decision-making behaviours as biases – shortcuts that help us process information and sort out preferences.

While these biases can be helpful in making decisions quickly, they can also blur our ability to make sound choices with successful outcome – particularly in the rollercoaster arena of financial markets.

A long-held interest in the behavioural aspect of finance was the motivation behind Dr Venura Welagedara’s recently-completed PhD.

By examining how personality traits, such as self-discipline and psychological biases, contribute to financial decisions, Venura was interested in understanding how investors respond to information from finance analysts.

‘I’ve been interested in the behavioural aspects of finance since the time I started my finance studies. I like to link these behavioural aspects to personal, as well as corporate finance, and understand how they contribute to financial decisions,’ he says.

Venura’s interest in finance began with a commerce degree at Deakin before a career in the financial planning industry followed by a master’s degree in applied finance at Monash University.

‘I was then employed as an academic tutor in business finance at Deakin and it didn’t take long for me to discover that my passion was in teaching. I always enjoyed the discussing important issues in finance and how they relate to the broader environment,’ he explains.

Although he was offered a PhD scholarship by another respected “group of eight” university, Venura says he chose to complete his doctorate at Deakin because of the university’s culture.

‘It was very friendly and open … the working relationships I built as a staff member was also another motivation to stay on at Deakin.’

Discovering a market anomaly (the drift of prices after the release of analyst recommendations) that was not fully explained by current finance literature, Venura’s thesis investigated recommendations by equity analysts and how investors responded to them.

 ‘I used a behavioural finance approach to explain it … my research reveals that analyst characteristics, individual investor behaviour and the private information contained in the analyst recommendations  contribute to the price drifts,’ he says.

One of the biggest challenges Venura faced during his four-year doctoral study was working as an empirical researcher and unearthing the revealing and relevant data patterns.

‘The most number of hours was spent cleaning, refining and analysing data. The complex nature of financial data, as well as the sheer volume of data, made this task extremely difficult,’ he explains.

But with the challenges also came rewards which included acceptance to two high-calibre international finance conferences.

‘One of them was the Behavioural Finance Working Group (University of London, UK), which is one of the best quality conferences in behavioural finance. Here, I discussed my ideas with a few world-class academics in my field which was an invaluable opportunity,’ he says.

Attending the conference enhanced his ability to look at financial concepts from different perspectives and also utilise different research methods.

He says it was a humbling experience to present in front of high-calibre academics from some of the world’s most prestigious universities.

‘My ability to objectively listen to both positive and negative feedback about my research has been enhanced due to these experiences.’

Reflecting on recent global financial turbulence, Venura says his research brings valuable insight into the role and behaviour of financial analysts and investors.

‘Analysts have a very important function in financial markets. The Global Financial Crisis (GFC), as well as corporate scandals such as Enron, reveals the power than the analysts have to influence investor decisions and the market.’

Most investors – and especially the less-experienced financial players – will exhibit behavioural biases when faced with a new set of figures or information, Venura says.

‘My research answers the question whether investors can utilise new analyst information to make profitable financial decisions. Further, it explains a market anomaly which is inconsistent with the overall concept of market efficiency.’

Like all PhD candidates, Venura sometimes found dissertation writing taxing yet but says he still managed to ‘thoroughly enjoy’ his work.  

‘I found that my Deakin colleagues and superiors were extremely helpful, knowledgeable and articulate. The time I spent as a PhD student is remembered as some of the most wonderful years of my life and I met some of my lifelong friends and mentors.’

With a chapter of his PhD now published in the Pacific Basin Finance Journal, Venura has other promising papers which he intends for high-quality journals and is looking forward to his sharing his contribution to global academic literature.

‘I also intend to continue to work on behavioural finance issues facing analysts and investors to further enhance my contribution to academic and the investment community,’ he adds.

Venura happily acknowledges that academia is his perfect workplace fit.

‘I love working with new ideas and understanding what patterns the data actually reveal. I enjoy discussing new ideas and refining them after intellectually stimulating discussions with colleagues. I really enjoy teaching and using my research to update and enhance what I teach. Teaching gives me an opportunity to look at every complex financial issue using a simplified lens.’