EXPLORING THE INFLUENCE OF BEHAVIOURIAL BIASES IN SHAPING INVESTMENT DECISIONS: A SMART PLS APPROACH

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Abilasha N

Abstract

Purpose: The field of behavioral finance has gained significant attention in recent years due to its ability to explain investor behavior and decision-making processes. This study aims to explore the influences of behavioral finance on investment decision making among investors in Mumbai, India. The purpose of the research is to identify various behavioral biases and heuristics that affect investment decisions and understand their implications for individual investors.


Methodology: This study adopts a quantitative research approach, employing primary data collection methods. The sample consists of 238 investors from Mumbai, chosen through a random sampling technique. The primary data is collected using structured questionnaires designed to capture relevant information about investment decisions, behavioral biases, and heuristics. The study utilizes statistical tools such as Smart PLS and SPSS for data analysis and hypothesis testing.


Findings: The analysis of the collected data reveals several noteworthy findings. Firstly, it identifies that investors in Mumbai are prone to behavioral biases such as loss aversion, overconfidence, and anchoring. These biases significantly influence investment decision making, leading to suboptimal outcomes. Secondly, the study uncovers the prevalence of heuristic-based decision-making patterns, such as representativeness and availability biases, which contribute to investment decision deviations from rationality. Additionally, the research highlights the impact of social influence and emotional factors on investment choices, emphasizing the role of herd behavior and sentiment in the investment process.


Research Implementation: Based on the findings, it is recommended that financial institutions and investment advisors in Mumbai develop educational programs and awareness campaigns to address behavioral biases among investors. Furthermore, investment platforms and robo-advisors can integrate behavioral finance principles into their algorithms to offer personalized recommendations that account for individual biases and preferences.


Originality: This research work is comprehensive in nature which helps in understanding various behavioral bias affecting on individual decision making.

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How to Cite
Abilasha N. (2024). EXPLORING THE INFLUENCE OF BEHAVIOURIAL BIASES IN SHAPING INVESTMENT DECISIONS: A SMART PLS APPROACH. European Economic Letters (EEL), 14(4), 2054–2063. https://doi.org/10.52783/eel.v14i4.2349
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