Impact of Behavioral Biases on Investment Decisions: Moderating Effect of Preferred Sector of Investment

Gupta, Sushma; Shrivastava, Monica

doi:10.51245/rijbr.v6i1.2021.244

Cited by 7 publications

(4 citation statements)

References 34 publications

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“…This research problem employed the use of partly Descriptive and partly Conclusive/ Causal. Tahir Imran Gulzar, Dr. Najabat Ali [2] study focuses on examining the impact of six behavioral biases (availability bias, self-control bias, overconfidence bias, illusion of control bias, and representative bias) on investment decisions. The findings of the study indicate that the variables under investigation explain 37.53% of the overall variance, suggesting that there are no significant issues with the chosen methodology.…”

Section: Literature Reviewmentioning

confidence: 99%

An Impact of Behavioral Bias on Investment Decision Making of Individual Investors

Amudha,

Chander

2024

IJIREM

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Behavioral finance has gained increasing prominence in understanding the role of psychological factors in shaping investment decisions. This study aims to investigate the impact of various behavioral biases on the investment decision-making process of individual investors. Specifically, it examines the prevalence and influence of biases such as confirmation bias, loss aversion, herding behavior, overconfidence, and regret aversion among individual investors. The study employs a quantitative approach, collecting data through a structured questionnaire from a sample of 201 individual investors. Descriptive statistics, correlation analyses, chi-square tests, and reliability measures are utilized to analyze the data and assess the relationships between behavioral biases, demographic factors, investment characteristics, and investment decisions. The findings reveal that behavioral biases are prevalent among the respondents, with varying degrees of influence on their investment decisions. Significant associations are observed between certain biases and factors such as annual income, percentage of investment from savings, frequency of investments, and investment types. For instance, individuals with higher incomes exhibit slightly more loss aversion tendencies, while those investing a higher percentage of their savings tend to demonstrate greater confirmation bias. The study contributes to the understanding of behavioral finance by providing empirical evidence on the impact of various biases on individual investors' decision-making processes. It highlights the importance of recognizing and mitigating these biases to promote more informed and rational investment decisions. The findings have implications for individual investors, financial advisors, and policymakers in developing strategies to enhance investment decision-making and overall financial well-being.

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Section: Literature Reviewmentioning

confidence: 99%

An Impact of Behavioral Bias on Investment Decision Making of Individual Investors

Amudha,

Chander

2024

IJIREM

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“…Aside from the influencers identified by Acquah-Sam (2014), studies within other developing countries (Babajide and Adetiloye, 2012;Khawaja et al, 2013;Gupta and Ahmed, 2017) have identified behavioural biases as a significant influencer of capital markets. These studies, however, focus on stock markets and so fail to explain how various behavioural biases impact or affect the performance of the mutual fund markets in those countries.…”

Section: Introductionmentioning

confidence: 99%

The impact of anchoring bias on investment decision-making: evidence from Ghana

Laryea

Owusu

2022

RBF

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PurposeThe objective of this paper is to explore how anchoring affects the dynamics of investor decision-making with regard to mutual funds and how this bias differs amongst gender and level of financial knowledge.Design/methodology/approachAn experimental research design was adopted to uncover the relationship between the variables under study; this involved the use of a questionnaire with an embedded experiment. Data obtained from the study were analysed using Pearson's chi-square test and two-way analysis of variance.FindingsThe findings show that, overall, investors were prone to be significantly influenced by the anchoring bias. The study finds a strong, albeit not significant, association between participants' susceptibility to anchor and both gender and the level of financial knowledge of participants. Females were observed to be more likely to anchor than their male counterparts. Also, a higher level of financial knowledge did not help to reduce the possibility of anchoring; it rather increased it.Research limitations/implicationsThe findings of the study cannot be interpreted as suggesting causality as the study only tests for association between variables and not causality. Additionally, external validity cannot be fully established as a result of the quasi-experiment approach used.Practical implicationsThe study adds to the body of knowledge on the influences of behavioural biases in the sub-region to make investors aware of their biases in order to minimise the influence of these biases on their investment decisions.Originality/valueThis study differs from earlier studies in that it analyses the presence of anchoring as influenced by a completely different set of variables (expertise and gender) and also does it within the context of an African country where there remains a paucity of research on behavioural finance.

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“…The intentions towards desiring an investment are driven by enumerable factors. When making investment decisions, investors can be biased (Gupta et al 2021). Rational investors are very aware of optimized decisions which is a part of their decision making.…”

Section: Introductionmentioning

confidence: 99%

Effect of Behavioral Biases on Investor Preferences of Tax Saving Instruments

Ojha

Agarwala

2022

epra

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The concept of rationality, has been studied in many theories till now but a new challenge in the field has emerged, Behavioral biases. The world today has recognized the relevance of behaviorism in decision making. The empirical evidence of stock market investors being influenced by Behaviorism is in abundance, but the database fails to present such information about behavioral impact on tax saving instruments. This study is an attempt to unveil the effect of biases on the part of investors while choosing tax saving instruments and add to the existing knowledge of literature on behavioral finance. A sample survey has been conducted through a structured questionnaire incorporating the convenience sampling technique. The biases selected from the behavior finance literature has been kept limited to Herd Behavior and Over Confidence pertaining to lack of literature. Chi square test has been used for the test of hypothesis. A significant association can be seen among age groups and their tendency to be biased. The findings of the study show an influence of biases in the selection of tax saving avenues which differ on specific demographic terms i.e., Age Group. Hence, a cogent argument can be placed on the relevance of behavior biases in tax saving decisions. KEYWORDS: Behavioral Biases, Herd Behavior, Investment Behavior, Over Confidence, Taxation. JEL Classification Code: D14, E20, H24, P30.

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Impact of Behavioral Biases on Investment Decisions: Moderating Effect of Preferred Sector of Investment

Cited by 7 publications

References 34 publications

An Impact of Behavioral Bias on Investment Decision Making of Individual Investors

An Impact of Behavioral Bias on Investment Decision Making of Individual Investors

The impact of anchoring bias on investment decision-making: evidence from Ghana

Effect of Behavioral Biases on Investor Preferences of Tax Saving Instruments

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