Heuristic Driven Biases in Investment Decision Making. A study using Structural Equation Modelling

Abstract

Purpose – The purpose of this research is to analyze the influence of heuristics driven biases on investor decision making in Indian stock market.

Design/methodology/approach– The primary data for the study was gathered using a structured questionnaire. The questionnaire was distributed online for 6 months from march 2022 to September 2022.The tests in this study were conducted using SEM by using AMOS 23.0 software and began with a model measurement test followed by confirmatory factor analysis to determine the suitability of endogenous and exogenous constructs in this study to the model fit test. The tests were also carried out to evaluate the path and testing hypothesis of the proposed research work.

Findings –The study find out that among the heuristics driven biases such as availability, representativeness and anchoring biases availability and representativeness has a significant effect on investors decision making. The results also support the idea that behavioural biases lead to irrationality in investors decisions in Indian stock market.  Investors feel secure in their attitudes regarding financial decision-making, even if their decisions are not always rational as they are affected by biases.

Originality/value – This article explains the influence of heuristics on investors’ decision-making in Indian stock market.