Investment Biases of Investors: Behavioral Influences and Market Implications

FINANCE

Investment decisions of any investor are influenced by some psychological and behavioral biases that deviate him or her from rational economic theory. These biases affect how an investor is perceiving risk, how he interprets information and how he is making financial choices. Thesedays, the field of behavioral finance contains systematic patterns in investment decision-making that cannot be explained by traditional financial models. This research paper is an attempt by the researchers to examine some common investment biases such as overconfidence, herd behavior, anchoring, loss aversion and confirmation bias among individual investors. Both primary and secondary data have been used here for analysis. This research paper focuses on the prevalence of these biases, the causes of these biases and their impact on portfolio performance of any investor. Based on the findings of this paper, the researchers have offered some practical suggestions to mitigate these biases and to improve the investment outcomes.

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