A Study on Influences of Psychological Biases on Investment decision of Indian Investors

Abstract

The field of behavioral finance has gained considerable attention in recent years as it seeks to understand how psychological biases impact investment decision-making. This study delves into the specific context of Indian investors to explore the influences of psychological biases on their investment choices. The Indian financial market has witnessed substantial growth and diversification in recent decades, making it an ideal setting to investigate how cognitive and emotional factors affect investment decisions. This research draws from a comprehensive analysis of existing literature, data from surveys, and interviews with Indian investors, aiming to identify and comprehend the most prevalent psychological biases that affect their investment behavior. There are basically three biases discussed here in this study viz. over confidence, availability and loss aversion bias. Key findings highlight the significance of cognitive biases like overconfidence, availability bias, and loss aversion in shaping investment choices. Moreover, cultural and socio-economic factors unique to India influence the manifestation and impact of these biases. The implications of this study can be valuable for investors, financial advisors, and policymakers in India. Understanding the psychological biases that drive investment decisions can aid in designing more effective financial education programs and investment strategies that align with individual investors' risk profiles and financial goals.