A Study on Behavioral Finance: Impact of Investor Psychology on Stock Investment Decision
DOI:
https://doi.org/10.64137/31079423/IJEBMR-V2I2P111Keywords:
Behavioral Finance, Investor Psychology, Decision-Making, Risk-taking Behavior, Stock InvestmentAbstract
This study focuses on the impact of investor psychology on stock investment decisions under the domain of behavioral finance. Behavioral finance explains how psychological factors, emotions, and cognitive biases influence investors while making financial decisions. The study aims to analyze how emotions such as fear and greed, along with behavioral biases like overconfidence, herd behavior, loss aversion, and anchoring, affect investors’ decision-making and risk-taking behavior in stock market investments. The research adopted a descriptive research design, and primary data were collected through a structured questionnaire from 150 respondents. Statistical tools such as percentage analysis, mean analysis, correlation analysis, and chi-square test were used to analyze the collected data. The findings revealed that most respondents were young and moderately experienced investors. The study also found that emotional and behavioral factors had only a weak influence on investment decisions among respondents. The correlation analysis indicated no significant relationship between emotional influence and risk-taking behavior, as well as between planned investment strategy and diversification decisions. Similarly, the chi-square analysis showed no significant association between investment experience and market fluctuations. The study concludes that investors generally rely more on rational judgment and financial awareness rather than emotional influences while making investment decisions. The research suggests that improving financial knowledge, proper planning, diversification, and consulting financial experts can help investors make better and more rational investment decisions.
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