"The Influence of Behavioral Finance on Investment Decision-Making: Exploring Psychological Factors in Financial Markets"
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Abstract
This research examines the profound influence of behavioural finance on investment decisions, with a specific emphasis on the complex interaction that exists between psychological variables and financial selections. The domain of behavioural finance has become an indispensable element in understanding the ways in which real-world investor conduct differs from the idealised rational models posited in conventional finance theories. The primary objective of this research paper is to conduct an exhaustive examination of the substantial impact that psychological biases and emotive influences have on investment decisions. The study investigates the foundational fallacies that influence decision-making processes, such as confirmation bias, overconfidence, loss aversion, and herding behaviour, by integrating perspectives from economics and psychology. The study employs empirical evidence and case studies to underscore the practical consequences of these biases on financial markets and investment strategies. This study investigates the manner in which these prejudices become evident in the actions of investors and how they influence the administration of investment portfolios, the perception of risk, and market inefficiencies. Moreover, the implications for individual investors, fund administrators, and the wider financial landscape are examined in the paper.