A Qualitative Study of Behavioral Biases Among Pakistani Investor Decisions

Abstract

The basic purpose of this study is to highlight the importance of behavioural biases in individual investors' decisions that cause deviation from rationality. It also helps them to accelerate their abilities in investment decision-making. This study used semi-structured open-ended questions to explore the behavioural bias in six individual investors of the Pakistan stock market. The thematic content analysis is used to analyze the data. This study explores eight behavioural biases of the individual investor in the Pakistan stock market and process it does not seem that all the investors will suffer from all the behavioural biases simultaneously. Their decision is based not only on quantitative analysis but also influenced by cognitive, emotional, and social biases. They depend on other sources of information before investing in the stock market. This study focuses on behavioural biases of individual investors of the Pakistan stock market so their results can not be generalized to institutional investors, real estate investors, or any other geographical area due to culture differences, education level, values, and financial structure. As this study explores only individual behavioural bias it leaves many areas that are unexplained for further research like institutional investors behavioural bias, real estate investors behavioural bias with more sample size.   The practical implications are it is helpful for companies, policymakers, and securities issuers can observe the investor interest and behaviour before issuing securities into the market. As far as the social implication is concerned it is good for investors to understand the several behavioral biases and make sound investment decisions that mitigate their risk. This paper explores the concept of behavioural biases in individual decision-making and adds value to the existing literature on behavioural finance.