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Role of Behavioral Finance in Investment Decision – A Study of Investment Behavior in India

Authors:
Vinay Kandpal at Graphic Era University
Vinay Kandpal
Rajat Mehrotra at Amrapali Group of Institutes
Rajat Mehrotra
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Abstract

The study attempts to analyze the behavior of investors towards investment pattern and to analyze the factors which an investor takes into consideration while taking Investment decision. Faculty members in Uttarakhand were surveyed using questionnaire. Study concludes that behavior matters a lot when it comes to making a wise investment decision and therefore in selecting a particular investment option it requires an investors complete considers factors like goals in life, spending habits, expenses, income, perception towards investments, lifestyle changes, time period, nature towards investment, thought process, natural habits, study of one’s financials, risk bearing capacity, liquidity and expected returns.
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International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528
http://www.researchersworld.com/ijms/
Vol.–V, Issue –4(6), October 2018 [39]
DOI : 10.18843/ijms/v5i4(6)/06
DOIURL :http://dx.doi.org/10.18843/ijms/v5i4(6)/06
Role of Behavioral Finance in Investment Decision –
A Study of Investment Behavior in India
Dr. Vinay Kandpal,
Assistant Professor,
Department of Accounting & Finance,
University of Petroleum & Energy Studies,
Dehradun, India.
Mr. Rajat Mehrotra,
Assistant Professor,
Lal Bahadur Shastri Institute of Management
& Technology, Bareilly, India.
ABSTRACT
The study attempts to analyze the behavior of investors towards investment pattern and to analyze
the factors which an investor takes into consideration while taking Investment decision. Faculty
members in Uttarakhand were surveyed using questionnaire. Study concludes that behavior
matters a lot when it comes to making a wise investment decision and therefore in selecting a
particular investment option it requires an investors complete considers factors like goals in life,
spending habits, expenses, income, perception towards investments, lifestyle changes, time period,
nature towards investment, thought process, natural habits, study of one’s financials, risk bearing
capacity, liquidity and expected returns.
Keywords: Behavioral, Finance, Savings, Investment.
INTRODUCTION:
“People in standard finance are rational. People in behavioral finance are normal.” - Meir Statman
Stock market complexities and market anomalies have led to the growth of a new field of financial research
namely “behavioral finance”. Financial market inconsistencies are cross-sectional and time series patterns in
returns from investment in securities that cannot be predicted by a central paradigm or theory. Behavioral
finance is the study of the influence of the psychological factors on an individual investment behaviour. This
new approach of financial research advocates that investment decision is affected by psychological and
emotional factors.
This new approach assumes that investors are influenced by psychological factors such as fear, hope, optimism
and pessimism. Role of these factors in investment and trading has changed the direction of research in the area
of Behavioral finance. Kahneman and Tversky (1979), Shefrin and Statman (1994) and Shleifer (2000) are the
researchers that have attempted to analyze the efficiency of financial markets and tried to discuss the
fluctuations in stock markets. With growing challenges in market environment, investors can benefit and can
beat the market if they properly analyse the different investment options and securities. Over the past five
decades established finance theory had assumed that investors have little difficulty in making investment
decisions. The invetors are well-informed, careful and consistent. The traditional theory holds that investors are
not confused by how information is presented to them and not swayed by their emotions. But clearly reality
does not match these assumptions and this led to move to new approach in finance theory.
Behavioral finance has gained importance over the last two decades as new area of Research due to the thought
that investors rarely behave as per the assumptions made in traditional theory of finance. Behavioral researchers
have taken the view that finance theory should take consideration the observation of human behaviour. They use
research from psychological point of view to develop an understanding of investment decision making and
create the discipline of behavioral finance.
International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528
http://www.researchersworld.com/ijms/
Vol.–V, Issue –4(6), October 2018 [40]
LITERATURE REVIEW:
The Behavioral theory showing the influence of human behaviour on investing decision emerges not as a
supplementary assumption, but as a contradictory approach. In this part of literature review, an attempt is made
to present a brief review of relevant research studies carried out on the behavioral finance and its impact on
Investment decision making. Lewellen (1977) through a research work concluded that age, sex, income and
education affect investors' preferences. Ippolito and Bogle (1992) analyzed that selection of fund by investors is
based on the past performance of the funds and money flows into winning funds more rapidly than they flow
out of losing funds. Shefrin’s (2001) analyzed that Behavioral Finance is the study of impact of psychology on
financial decision making.
Phillip (1995) analysed the changes in financial decision-making and investor behavior after participating in
investor education programs. In India, SEBI organizes awareness program for small investors, which has started
giving benefits, in terms of value investing and informed investing from retail investors. Madhusudhan and
Jambodekar (1996) concluded that investors expect better services from the Company where they invest. The
majority of investors invest for safety of principal, liquidity and capital gain. According to a survey conducted
by SEBI (1998) investment objective of the investor, risk appetite, income or funds available for investment
influences the investment behavior in securities market across different levels.
Sewell (2005) concluded that Behavioural finance is the study of the influence of psychology on the behaviour
of financial practitioners and the subsequent effect on markets.
Tavakoli (2011) inspected the different factors influencing the decision of the investors. He analyzed the 13
factors to determine whether the investors consider these factors and decisions are influenced by these factors.
He found that some of these factors are more influencing including financial statement, consulting with
anybody, second hand information resources, financial ratios, reputation of the firm, profitability variable. Most
important sub variable of profitability is the dividend.
Kadariya (2012) investigated factors impact on the investor decision. These factors include capital structure,
political and media coverage, luck and financial education and trend analyses in the Nepalese capital market.
He concluded that majority of the investors are youngsters and they take decision considering the media
coverage and friends recommendations as good source of information. Dividend, earning, equity contribution
and government control are considered the most important factors while taking the decision. Investors when
bears the loss blame to the market and when earns profit take whole credit to their own abilities.
Keeping this background in mind, this paper is focused on the study of behavioral finance on Investment decisions
in Uttarakhand especially focusing on Faculty members as they can guide the future decision makers in a better
manner . Although few research studies are available which highlights the Investment behavior of investors, but
analysis of savings and investment decision making is still an area which needs to touch and require an empirical
analysis. This research work is an attempt made to fill this gap in research. The main objective is to identify
various behavioral factors influencing the decision of investor in Uttarakhand. Uttarakhand is a small state with
limited number of options for earning. So how to manage or allocate money is a key area to focus.
OBJECTIVE OF STUDY:
The study was conducted taking into consideration the following objectives:
I. To analyze the savings and investment decision
II. To detect the factors which have an impact on the investor's decision and
III. To identify the preferred investment options.
RESEARCH METHODOLOGY:
The study is exploratory and descriptive in nature. The methodology of the study is discussed as follows:
Population:
The population for the study includes the investors of the Dehradun.
Source and Tool of Data Collection:
The study uses primary as well as secondary source of information. For collecting data from the sample
respondents and the questionnaire was used. Questionnaire were distributed to 400 people out of which
response was received from 358 respondents. The data collected was analyzed using different analytical tools
like percentage , frequencies, charts, likert -scale etc.
International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528
http://www.researchersworld.com/ijms/
Vol.–V, Issue –4(6), October 2018 [41]
DATA ANALYSIS AND INTERPRETATION
Age profile of the investors:
21-30
99
27.6%
31-40
179
50%
41-50
55
15.5%
Above 50
25
6.9%
50% of the total population falls in the age group of 31 years to 40 years while remaining 27.6% population
falls in the age group of 21 years to 30 years.
Marital Status
Single
99
27.60%
Married
259
72.40%
72.4% of the total investors population and the remaining 27.6% are single.
Qualification
168
46.60%
6
1.70%
0
0%
160
44.80%
25
6.90%
As far as educational qualification is concerned 46.6% of the population had doctorate degree and 44.8% were
Post graduates. Monthly Income
Less than 5,000
31
8.60%
5,000-10,000
0
0%
10,000-20,000
12
3.40%
20,000-30,000
56
15.50%
Above 30,000
259
72.40%
72.4% of the total population belong to the income bracket of above Rs. 30,000, followed by income bracket
between 20,000-30,000 with 15.5 % of the population, 8.6 % of the population have income less than 5,000 and
the remaining 3.4% have their income between 10,000-20,000.
Years of Experience
Under 5 years
86
24.10%
5-10 years
86
24.10%
Above 10 years
186
51.70%
51.7% of the total population have an experience of above 10 years.
Assured Return [What is the main purpose for Investment decision?]
Highly Important
204
56.90%
Important
130
36.20%
Neutral
19
5.20%
Less Important
6
1.70%
Least Important
0
0%
56.9% of the total population consider assured return as highly important whereas 36.2% of the total population
consider assured return as important.
International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528
http://www.researchersworld.com/ijms/
Vol.–V, Issue –4(6), October 2018 [42]
Low Risk [What is the main purpose of Investment decision?]
Highly Important
93
25.90%
Important
167
46.60%
Neutral
80
22.40%
Less Important
12
3.40%
Least Important
6
1.70%
46.6% of the total population consider low risk as an important investment decision whereas 25.9% of the total
population consider low risk as highly important investment option.
Tax benefits [What is the main purpose for Investment decision?]
Highly Important
111
31%
Important
204
56.90%
Neutral
37
10.30%
Less Important
6
1.70%
Least Important
0
0%
56.9% of the total population consider tax benefits as an important investment decision whereas 31% of the
total population consider tax benefits as highly important investment decision.
Child Education [What is the main purpose for Investment decision?]
Highly Important
100
27.60%
Important
86
24.10%
Neutral
80
22.40%
Less Important
43
12.10%
Least Important
49
13.80%
27.6% of the total population consider Child education as highly important investment decision whereas 24.1%
of the total population conside as important investment decision.
Daughter Marriage [What is the main purpose for Investment decision?]
Highly Important
62
17.20%
Important
49
13.80%
Neutral
87
24.10%
Less Important
55
15.50%
Least Important
105
29.30%
29.3% of the total population considers daughter marriage as least important investment decision whereas
24.1% of the total population conside daughter marriage as neutral investment decision.
Speculation [What is the main purpose for Investment decision?]
Highly Important
6
1.70%
Important
86
24.10%
Neutral
111
31%
Less Important
62
17.20%
Least Important
93
25.90%
31% of the total population considers speculation as netural investment decision whereas 25.9% of the total
population conside spectulation as least importantl investment decision.
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Vol.–V, Issue –4(6), October 2018 [43]
Capital Gain [What is the main purpose for Investment decision?]
Highly Important
80
22.40%
Important
173
48.30%
Neutral
55
15.50%
Less Important
19
5.20%
Least Important
31
8.60%
48.3% of the total population considers capital gain as important investment decision whereas 22.4% of the
total population conside capital gain as highly important investment decision
Retirement [What is the main purpose for Investment decision?]
Highly Important
80
22.40%
Important
179
50%
Neutral
49
13.80%
Less Important
31
8.60%
Least Important
19
5.20%
50% of the total population considers retirement as important investment decision whereas 22.4% of the total
population conside retirement as highly important investment decision
Secured Future [What is the main purpose for Investment decision?]
Highly Important
179
50%
Important
142
39.70%
Neutral
19
5.20%
Less Important
6
1.70%
Least Important
12
3.40%
50% of the total population considers secured future as highly important investment decision whereas 39.7% of
the total population considers secured future as important investment decision.
Safety of Investment [What is the main purpose for Investment decision?]
Highly Important
216
60.30%
Important
124
34.50%
Neutral
18
5.20%
Less Important
0
0%
Least Important
0
0%
60.3% of the total population considers safety of investment as highly important investment decision whereas
34.5% of the total population considers safety of investment as important investment decision.
Investment amount [What are the factors which have implications on Investment Decision?]
Highly Important
124
34.50%
Important
216
60.30%
Neutral
6
1.70%
Less Important
12
3.40%
Least Important
0
0%
60.3% of the total population considers investment amount as important investment decision whereas 34.5% of
the total population considers investment amount as highly important investment decision.
International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528
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Vol.–V, Issue –4(6), October 2018 [44]
Potential Risk [What are the factors which have implications on Investment Decision?]
Highly Important
142
39.70%
Important
179
50%
Neutral
12
3.40%
Less Important
19
5.20%
Least Important
6
1.70%
50% of the total population considers potential risk as important investment decision whereas 39.7% of the total
population considers potential risk as highly important investment decision
Potential Gain [What are the factors which have implications on Investment Decision?]
Highly Important
167
46.60%
Important
179
50%
Neutral
12
3.40%
Less Important
0
0%
Least Important
0
0%
50% of the total population considers potential gain as important investment decision whereas 46.6% of the
total population considers potential gain as highly important investment decision
Tax advantage [What are the factors which have implications on Investment Decision?]
Highly Important
86
24.10%
Important
234
65.50%
Neutral
26
6.90%
Less Important
12
3.40%
Least Important
0
0%
65.5% of the total population considers Tax advantage as highly important investment decision whereas 24.1%
of the total population considers Tax advantage as highly important investment decision.
Liquidity [What are the factors which have implications on Investment Decision?]
Highly Important
86
24.10%
Important
204
56.90%
Neutral
62
17.20%
Less Important
6
1.70%
Least Important
0
0%
56.9% of the total population considers Liquidity as important investment decision whereas 24.1% of the total
population considers Liquidity as highly important investment decision
Customer Service [What are the factors which have implications on Investment Decision?]
Highly Important
93
25.90%
Important
148
41.40%
Neutral
86
24.10%
Less Important
19
5.20%
Least Important
12
3.40%
41.4% of the total population considers Customer Service as important investment decision whereas 25.9% of
the total population considers Customer Service as highly important investment decision.
International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528
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Vol.–V, Issue –4(6), October 2018 [45]
Ease of marketability [What are the factors which have implications on Investment Decision?]
Highly Important
62
17.20%
Important
167
46.60%
Neutral
86
24.10%
Less Important
31
8.60%
Least Important
12
3.40%
46.6% of the total population considers Ease of marketability as important investment decision whereas 24.1%
of the total population considers Ease of marketability as important investment decision
Perception [What are the factors which have implications on Investment Decision?]
Highly Important
43
12.10%
Important
185
51.70%
Neutral
86
24.10%
Less Important
32
8.60%
Least Important
12
3.40%
51.7% of the total population considers Perception as important investment decision whereas 24.1% of the total
population consider Perception as neutral important investment decision
Past experience [What are the factors which have implications on Investment Decision?]
Highly Important
99
27.60%
Important
160
44.80%
Neutral
62
17.20%
Less Important
25
6.90%
Least Important
12
3.40%
44.8% of the total population considers Past experience as important investment decision whereas 27.6% of the
total population consider Past experience as highly important investment decision
Lack of Confidence [What are the factors which have implications on Investment Decision?]
Highly Important
43
12.10%
Important
148
41.40%
Neutral
99
27.60%
Less Important
43
12.10%
Least Important
25
6.90%
41.4% of the total population considers Lack of Confidence as important investment decision whereas 27.6% of
the total population considers Lack of Confidence as neutral investment decision.
Information through Internet [What are the factors which have implications on Investment Decision?]
Highly Important
37
10.30%
Important
179
50%
Neutral
68
19%
Less Important
55
15.50%
Least Important
19
5.20%
50% of the total population considers as Information through Internet important investment decision whereas
19% of the total population considers Information through Internet as neutral investment decision.
International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528
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Vol.–V, Issue –4(6), October 2018 [46]
Information from the Company [What are the factors which have implications on Investment Decision?]
Highly Important
99
27.60%
Important
124
34.50%
Neutral
99
27.60%
Less Important
31
8.60%
Least Important
6
1.70%
34.5% of the total population considers as Information from the Company important investment decision
whereas 27.6% of the total population considers Information from the Company as highly important & neutral
investment decision
Financial knowledge [What are the factors which have implications on Investment Decision?]
Highly Important
99
27.60%
Important
191
53.40%
Neutral
43
12.10%
Less Important
19
5.20%
Least Important
6
1.70%
53.4% of the total population consider Financial knowledge as important investment decision whereas 27.6% of
the total population considers Financial knowledge as important investment decision
Ease of Purchase [What are the factors which have implications on Investment Decision?]
Highly Important
124
34.50%
Important
198
55.20%
Neutral
19
5.20%
Less Important
19
5.20%
Least Important
0
0%
55.2% of the total population considers ease of purchase important in taking investment decision.
Familiarity [What are the factors which have implications on Investment Decision?]
Highly Important
93
25.90%
Important
198
55.20%
Neutral
43
12.10%
Less Important
19
5.20%
Least Important
5
1.70%
55.2% of the total population consider Familiarity as important investment decision whereas 25.9% of the total
population considers Familiarity as highly important investment decision.
Professional Investment Management [What are the factors which have implications on Investment
Decision?]
Highly Important
80
22.40%
Important
173
48.30%
Neutral
74
20.70%
Less Important
25
6.90%
Least Important
6
1.70%
48.3% of the total population considers Professional Investment Management as important investment decision
whereas 22.4% of the total population consider Professional Investment Management as highly important
investment decision.
International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528
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Vol.–V, Issue –4(6), October 2018 [47]
Suggestion by Friends [What are the factors which have implications on Investment Decision?]
Highly Important
43
12.10%
Important
191
53.40%
Neutral
80
22.40%
Less Important
38
10.30%
Least Important
6
1.70%
53.4% of the total population considers Suggestion by Friends as important investment decision whereas 22.4%
of the total population considers Suggestion by Friends as neutral investment decision
Suggestion by Relatives [What are the factors which have implications on Investment Decision?]
Highly Important
43
12.10%
Important
148
41.40%
Neutral
74
20.70%
Less Important
74
20.70%
Least Important
19
5.20%
41.4% of the total population considers Suggestion by Relatives as important investment decision whereas
20.7% of the total population considers Suggestion by Relatives as less important & neutral investment decision.
Guidance by Investment Consultant [What are the factors which have implications on Investment
Decision?]
Highly Important
68
19%
Important
167
46.60%
Neutral
68
19%
Less Important
43
12.10%
Least Important
12
3.40%
46.6% of the total population considers Guidance by Investment Consultant as important investment decision
where as 19% of the total population considers Guidance by Investment Consultant as highly important &
neutral investment decision.
Financial dailies [What are the factors which have implications on Investment Decision?]
Highly Important
37
10.30%
Important
191
53.40%
Neutral
55
15.50%
Less Important
68
19%
Least Important
6
1.70%
53.4% of the total population consider Financial dailies as important investment decision whereas 15.5% of the
total population considers Financial dailies as neutral investment decision.
TV Channels [What are the factors which have implications on Investment Decision?]
Highly Important
31
8.60%
Important
160
44.80%
Neutral
62
17.20%
Less Important
80
22.40%
Least Important
25
6.90%
44.8% of the total population considers TV Channels as important investment decision whereas 22.4% of the
total population considers TV Channels as less important investment decision
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Vol.–V, Issue –4(6), October 2018 [48]
Colleagues /Peer Groups [What are the factors which have implications on Investment Decision?]
Highly Important
49
13.80%
Important
142
39.70%
Neutral
86
24.10%
Less Important
62
17.20%
Least Important
19
5.20%
39.7% of the total population considers Colleagues /Peer Groups as important investment decision whereas
24.1% of the total population considers Colleagues /Peer Groups as neutral investment decision.
Newspapers [What are the factors which have implications on Investment Decision?]
Highly Important
49
13.80%
Important
173
48.30%
Neutral
74
20.70%
Less Important
49
13.80%
Least Important
13
3.40%
48.3% of the total population consider newspaper as important investment decision whereas 20.7% of the total
population considers newspaper as neutral investment decision.
After analysing the above information following interpretation could be drawn:
1. 50% of the total population falls in the age group of 31 years to 40 years while remaining 27.6% population
falls in the age group of 21 years to 30 years.
2. 72.4% of the total investor’s population and the remaining 27.6% are single.
3. As far as educational qualification is concerned 46.6% of the population had doctorate degree and 44.8%
were Post graduates.
4. 72.4% of the total population belong to the income bracket of above Rs. 30,000.
5. The respondents were asked about the purpose for Investment decision which they consider highly
important. The respondents replied that they focus on assured returns, tax benefits, capital gain, low risk,
safety of investment, secured future, child education and daughter marriage.
6. According to the response received the factors which have an impact on decision making includes Tax
Advantage, Ease of Purchase, Familiarity, Liquidity, Suggestion by friend, Potential Risk, Potential Gain,
Financial knowledge, Investment amount, Financial dailies, Information through Internet, Professional
Investment Management, Perception, Ease of Marketability, Newspaper, Past experience, Customer
Service, Guidance by Investment Consultant, TV Channels, Lack of Confidence, Suggestion by Relatives
and Peer Groups/Colleagues.
CONCLUSION:
Investment decision in India is taken into consideration by perception,by word of mouth,by pass returns and
honestly investment decision in India is not taking seriously and lack proper planning for the long term
investment rather it is done quickly and no proper detail review regarding investment take place. So to over
come this problem this study highlight the behavior of the different investor and how it impacted the investment
decision in India. Behavioural finance is considered to be the important element in any investment decision in
Indian capital market. Through this study the analusis of investor saving and investment decision making in
Indian capital market is highlighted with 358 respondents opinion is gathered. The various parameter for which
the behavior of investors for investing in Indian capital market. Majority of investor more than 50% are in the
age group of 31 to 40 and the majority investors are married with 72.4% respondents, the decision of
investment are not taken hurridly it requires proper planning and education in terms of knowledge of the various
investment products and 46.6% of the population is having a doctorate degree and the majority of the
individuals are investing there surplus money into the capital markets with monthly income of Rs. 30000 and
above with 72.4% respondents. It is concluded from our research that behavior matters a lot when it comes to
making a wise investment decision and therefore in selecting a particular investment option it requires an
investors complete behaviorical pattern which includes goals in life, spending habits, expenses, income,
perception towards investments, lifestyle changes, time period, nature towards investment, thought process,
International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528
http://www.researchersworld.com/ijms/
Vol.–V, Issue –4(6), October 2018 [49]
natural habits, study of one’s financials, risk bearing capacity, liquidity, expected return and linking of the
investment with the goals, the understanding of the investment objective in line with one’s goals. To be a
successful investor one should follow one’s psychology related to analyzing the different investment avenues in
the Indian capital market and how to take a final decision in terms of selecting the best possible investment
avenue.The behaviour pattern of investing in capital makket is different from general human behaviour but
there are certain common points like goal clarity, understanding the product, risk analysis, investment
comparison, linkage with individual goals and requirements, time period of investment are some of the common
factors which are generally acceptable key factors to judge an individual behaviour and link it with the capital
market investment in particular.
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... It means all the investors behave relational while investing in stocks or any kind of investment avenue(K. BHATT, 2014) also, investors are not confused about old or new information provided by investor managers and are not affected by their emotions (Kandpal & Mehrotra, 2018) but the actual condition does not match with traditional theory and a new approach namely behavioral finance emerged. ...
Behavioral finance: A systematic literature review
Article
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  • Nov 2024
Purpose: The goal of this research is to identify the various behavioral biases that influence individual investors' investment decisions in order to create a conceptual model of behavioral biases and a historical framework of behavioral biases. These efforts will also serve to provide future directions for behavioral finance and behavioral bias research. Design/Methodology: This study's foundation is an analysis of pertinent behavioral finance research papers published between 2011 and 2023 as well as behavioral biases. Google Scholar, Research Gate, Emerald Inside, Taylor and Francis, Shodh Ganga, Science Direct Etc. are the core sources of the papers reviewed in this study. The tabular form is used for Discussing reviews of the present paper. Findings: The present paper describes the literature review on behavioral finance and biases from 2011 to 2023 and it is still continuous in underdeveloped and developed nations. Also, find out that the study on behavioral finance increased in the past few years. Originality/Value: The present paper caters to different types of classification and review of behavioral finance and behavioral biases and also presents the collection in the form of a systematic review matrix of behavioral finance, this will help students, Researchers, academicians for next level research on the topic of behavioral finance.
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... In addition, they observed that the manufactured persons had indices of life happiness, intra-specific thinking, and neuroticism. Kandpal, Mehrotra (2018) discovered that the cash-related experts' active understanding traits Empirical Assessment of how the Impact of Emotional Intelligence... ...
Empirical Assessment of How the Impact of Emotional Intelligence and Behavioural Biases Determine the Investment Decisions of Information Technology Professionals
Article
Full-text available
  • Dec 2023
Research background Emotional intelligence (EI) has been shown in earlier research to be crucial in determining how people proceed through life. Emotional intelligence (EI) is one of the most important determinants of how people relate to one another and feel. Purpose The study’s main aim is to comprehend in detail the assessment of Behavioural components and better understand the decision-making process of Information Technology Professionals, interrelationship and impact of emotional intelligence. Research methodology 438 Information Technology Professionals provided the data for this study. The study conducted in a tri-city area in India consisting of Chandigarh, Mohali, and Panchkula. This investigation used the purposive testing technique and a conceptual framework developed to outline an empirical assessment of the impact of emotional intelligence on the behavioural biases of IT professionals. Results Individual investors’ investment selections connected to information technology professionals’ conduct predispositions and emotional intelligence insights. Information Technology Professionals take investing selections that have an impact of Emotional Intelligence. Novelty Knowledge of behavioural biases while making an investment choice will be useful for financial advisers, who can then advise investors on how to counteract such biases.
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... The theory of planned behaviour is studied and it is found that by making the investors aware and literate in the field of finance, the undue influence that is created on them by the social pressure would be subdued and they would be enabled to take rational decisions. Kandpal (2018) There are many factors that influence the behaviour of investors which inturn impact the decisions that are taken by them with respect to investments, and these factors are studied by the author in detail to come to a conclusion that behaviour matters in decisions. Roopadarshini (2014) Situations and environment has to be considered before making an investment decision along with many other factors that might affect the same. ...
BEHAVIOURAL FINANCE AND INVESTMENT DECISION MAKING
Article
  • Sep 2023
The study has been undertaken to critically examine if behaviour and biases of an individual investor have any impact on the selection of alternatives that are available to them in terms of the investments that they make. A brief analysis of the various theories available in terms of the above topic are also examined for their validity. The conclusion drawn based on the reviews of published papers is that behaviour, biases affect decision making and as such an investor has to be mindful of these biases and make sure that he doesn’t lose out on opportunities because of this.
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... Therefore, consideration and caution are needed in making investment decisions. When making investment decisions, an investor will be influenced by psychological factors such as fear, hope, optimism, and pessimism (Kandpal & Mehrotra, 2018). The reason psychological factors play a role in making investment decisions is that behind every investment choice, there is always a risk that must be borne. ...
Investment Decisions in the Capital Market: Perceptions of Christian Students
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  • Jul 2023
Over time, the management of the capital market in Indonesia has undergone changes for the better. The growth in the number of investors in the secondary market is an indicator that the Indonesian capital market is increasingly in demand, especially by young people. The various conveniences in investing and the relatively small initial capital make it attractive for novice investors. This study aims to explore Christian students' perceptions of investment decisions in the capital market. The selection of Christian students as the research sample was based on the results of a pre-survey of one of the capital market investment galleries at state universities in Indonesia which involved the active involvement of Christian students as administrators. The results showed that the investment characteristics of Christian students were not entirely good in terms of self-confidence, knowledge, and self-control, but the psychological perspective of investing was good because they were confident and careful in making investment decisions.
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A Systematic Review and Meta-Analysis of Behavioral Finance
Conference Paper
Full-text available
  • Jan 2025
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AN ANALYSIS OF BEHAVIOURAL FINANCE AND ITS INFLUENCE ON INVESTMENT DECISION
Article
  • Sep 2024
This research delves into the fascinating realm of Behavioural Finance, exploring its significant influence on investment decision-making among residents in India's National Capital Region (NCR). By drawing on insights from relevant studies, this work seeks to uncover the intricate link between human behaviour and financial decision-making within this demographic. The study begins by examining the unique financial behaviours of investors in the region, aiming to identify the key investor profiles that shape the investment environment. As a multidisciplinary field combining elements of psychology, sociology, and finance, Behavioural Finance provides the primary framework for this exploration. The research distinguishes between its micro and macro perspectives: the detailed analysis of individual behavioural traits of investors and the broader identification of inefficiencies in the market. Recognizing the pervasive impact of behavioural biases on investment behaviours and decisions, this study offers an in-depth review of diverse research within the Behavioural Finance domain. It sheds light on how human psychology and social dynamics interact with financial decision-making, highlighting the crucial role of Behavioural Finance in contemporary financial practices. In an era where financial markets are not merely governed by rationality but are also shaped by complex human behaviours, this research offers valuable insights into the dynamics of Behavioural Finance. By illuminating the distinct investment choices, the study aims to deepen our understanding of the factors influencing these decisions, ultimately equipping investors and financial professionals with more informed decision-making strategies.
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I Investor's Perception of Engagement and Technological Advancement on the Option Trading Platforms
Conference Paper
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  • Jul 2024
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A STUDY ON BEHAVIORAL FINANCE OF INVESTORS IN BANKS
Article
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  • Dec 2023
Purpose: The article looks into the implications of financial behaviour and how it affects an investor's choice ofinvestments.Design/ Methodology: The study's information collected from secondary sources like magazines, books, andjournal papers that were found using search engines like Google Scholar, Researchgate, and others.Findings/ Results: According to the results of this study, investor perceptions unquestionably have a strongand significant impact on financial decisions. In order to choose the best investment products, the behaviouralfinance framework looks into the attributes of investors' behaviour. Investors should diversify theirinvestments to connect to the lowest risk.Originality Value: Every investor needs to choose their investments wisely. Therefore, although someinvestors do not do so, it is the investor's responsibility to follow the information provided by the bank.According to the study, it will be helpful to identify the factors influencing investors' investment decisions byconducting a behavioural survey.
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Enhanced Learning Experience with Gamification to Increase Awareness of Finance Among Young Children
Chapter
  • Jul 2023
With appropriate financial information, individuals can bail themselves out of destitution. Despite this fact, finance is an overlooked aspect of most people’s lives. Many societal and scientific aspects are integrated into our educational curriculums but unfortunately, no electives on understanding the fundamentals of finance are offered. Although children know that money needs to be kept in banks for its safety, they are clueless as to how they can increase their savings without compromising their lifestyles. This study is targeted at developing a playful game for educating children above 10 years of age about the many benefits of investment and financial prudence. With an aim of drawing and retaining the attention of youngsters, the design solution is tethered around participative approaches and building collaborative creative spaces, and a fun way of learning a complex subject of Finance. The fundamental concepts of earnings, expenditure, savings, and investment for the future were demystified with simple examples. The concept of Income Tax was also included while drafting the game architecture. An exciting new board game named “Cash Hike” has been designed focusing on six major investment types–Savings, Fixed Deposits (FD), Public Provident Fund (PPF), Gold, Mutual Funds, and Stocks–for a maximum of four players. The game strategy involves imparting knowledge and giving experiences on how different investment types work. Feedback received from real-time users has conclusively validated the efficacy of the game in making the players understand the importance of informed monetary decisions.KeywordsGamificationLearning experienceCollaborationTeamParticipativeInvestmentSharesFinanceBoard game designChildrenTeenagersGamesFinancial literacy
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Factors affecting investor decision making: A case of Nepalese capital market
Article
Full-text available
From the past decades, the financial market has been suffering from the unforeseen and sudden economic turbulences that have been directly or indirectly contributing for the stock returns. The study primarily analyzes the market reactions to tangible information and intangible information in Nepalese stock market and to examine the investors' opinions in Nepalese stock market issues. The sample size is 185 stock investors and the response rate is 27 percent. The major findings of the study are: the capital structure and average pricing method is one factor that influence the investment decisions, the next is political and media coverage, the third factor is belief on luck and the financial education, and finally the forth component for stock market movement is trend analysis. Thus, it is concluded that both the tangible and intangible information are essential to succeed in Nepalese capital market.
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The Impact of Investor Socio-Economic Characteristics on Risk and Return Preferences
Article
Full-text available
  • Oct 1974
  • J BUS RES
The balancing of risk and return represents the classic investor dilemma. In theory, an investor seeks to maximize overall rate of return consistent with a desirable risk level. In practice, investor personal and financial characteristics may influence their risk/return preferences. Investors with similar socioeconomic characteristics tend to have similar risk/return preferences. That is, investors differ significantly in such factors as objectives, tastes, and needs, but most of the these differences may be explained by levels of risk and return investors feel appropriate. There has not been great deal of empiricism on the "positive" aspects of investor behavior. The purpose of this study is to provide some empirical evidence on the relationships, if any, of selected socioeconomic characteristics with the importance individual investors actually assign to the risk/return characteristics of common stock. Specifically, the relationships between each of eight socioeconomic characteristics and five risk and return preference variables. The findings of this study suggest that some socioeconomic characteristics have a greater impact on investor common stock risk and return preferences than do others. When viewed in terms of the number of significant relationships found, the most important socioeconomic characteristic investigated is age, followed by sex, decision orientation, marital status, education, and income. Because of the limited nature of the sample and the fact that some of the findings are inconsistent with previous observations and tests, additional research is needed to generalize the findings. Nonetheless, the findings strongly suggest that individual investor risk/return preferences for common stock reflect their socioeconomic characteristics.
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Why Do Women Invest Differently than Men?
Article
Full-text available
  • Feb 1997
Several recent studies have found that women invest their pensions more conservatively than men (Bajtelsmit and VanDerhei, 1996; Hinz, McCarthy, and Turner, 1996) and that women are more risk averse (Jianakoplos and Bernasek, 1996). Although these findings have serious implications for the well-being of women in retirement, the reasons for observed gender differences are less well- defined. This paper surveys the existing literature regarding gender differences in investment and considers the policy implications of these differences. The authors provide a summary and organization of the explanations for gender differences that have been offered in a variety of fields, including economics, sociology, education and gender studies.
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A study on small investors' behavior in choosing stock case study: Kuala-Lumpur stock market
Article
This study follows a qualitative methodology to investigate small investors' behavior in choosing stock in Kuala-Lumpur stock market. Small investors usually capture the numerous factors to purchase a definite share within the security market. These factors dramatically influences investors' behavior and change their decisions to purchase a particular stock. According to this description, the main purpose of this study is to identify the key determinants of choosing stock by small investors. A purposive sampling technique is employed to recruit 12 small investors based on desired range of demographic characteristics (for example sex and age), experience levels in purchasing stock and value of purchasing per time in ringgit. The research evidence reveals 13 effective factors in choosing stock which can influence small investors' decisions for stock selection. These factors are in order of importance involving "financial statements of companies, accounting instruments, past stock price (return), firms' public information, profitability variables, consult with anybody, financial ratios, past trading volume of stocks, second-hand information resources, discounted cash-flow tools, government policies, calculation of risk and economic variable.
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Selecting equity mutual funds
Article
  • Dec 1992
Picking the winning mutual fund is virtually impossible, given that reliance on past performance is of no apparent help, although picking a winning fund is made easy by selecting a passive all-market index fund: The author calls this a peculiar paradox of investing. He concludes that investors in the 1990s should consider index funds for a core portion of their equity holdings.
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Inefficient Markets: An Introduction To Behavioral Finance
Book
  • Jun 2002
  • J INST THEOR ECON
The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.
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Increased debt and industry product markets An empirical analysis
Article
  • Feb 1995
  • J FINANC ECON
This paper tests for changes in firms' production and pricing decisions in four industries in which firms have sharply increased their financial leverage. The analysis of product price and quantity data shows that industry product market decisions are associated with capital structure. In three industries, output is negatively associated with the average industry debt ratio. In the one industry which shows a positive association between output and debt ratios, rival firms have low financial leverage and entry barriers are relatively low. Analysis of executive compensation data supports the hypothesis that managers' incentives to maximize shareholders' wealth increase following recapitalization.
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