Citation:

Rishita Rai. "Behavioural Biases and Investment Decision-Making in India: A Study of Stock Market Investors" International Research Journal of Economics and Management Studies, Vol. 3, No. 11, pp. 11-24, 2024.

Abstract:

This paper examines the impact of behavioral biases on investment decisions among Indian stock market investors. Focusing on five major biases-loss aversions, overconfidence, herding behavior, anchoring, and representativeness bias, the present study tries to establish whether these occur together and/or mutually interact with socio-demographic variables like age, gender, education, and investment experience. Based on 118 questionnaires of experienced investors, this study found a significant positive correlation between age and loss aversion bias, which means older investors are more sensitive to losses. In contrast, the case of anchoring bias is reversed as there is an inversely negative correlation between the anchoring bias and age. Thus, a younger investor tends to be over-concentrated on a specific reference point. While the obvious winner is a preference for learning investment fundamentals, a significant number of respondents exhibit herding, showing that social pressures still significantly influence investment decisions. Finally, the study concludes by placing emphasis on financial education, which is positively associated with a greater amount of financial literacy and, subsequently, with a potential reduction in vulnerability to biases.

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Keywords:

Behavioural Finance, Investment Decision-Making, Loss Aversion, Anchoring Bias, Herding Behaviour, Overconfidence, Representativeness Bias, India.