An analysis of behavioural biases in investment decision making

Abstract

The psychological biases cause participants in the financial market to feel uneasy and unfavourable, which causes them to act impulsively. Against this backdrop, this study attempted to investigate the connection between behavioural bias and financial decision-making for stock market investors. This study is sample-based and the sample of the study has been stock market investors from Rajasthan. Our results confirm that behavioural bias plays a significant role in explaining investment decisions. Specifically, we find a positive relationship between overconfidence bias, optimism bias, disposition bias and home bias on investment decision-making and a significant negative relationship between herding bias on investment decision making. These results imply that investor psychology plays an important role in investment decision-making.