UNDERSTANDING BEHAVIOURAL BIASES IN INVESTMENT DECISION-MAKING OF A STOCK MARKET INVESTOR

Abstract

Investment decisions in the stock market are often assumed to be rational and based purely on logical evaluation of information. However, real-world behaviour shows that investors are frequently influenced by psychological factors that shape their financial choices. This study explores how behavioural biases such as overconfidence, loss aversion, herding behaviour, and anchoring affect the decision-making process of retail investors. Primary data were collected through a structured questionnaire, and the responses were analysed using descriptive and regression techniques to understand the strength of these influences. The findings suggest that investors do not always act rationally. Many participants displayed overconfidence in their abilities, followed market trends without independent analysis, or hesitated to sell underperforming investments due to fear of losses. The statistical results indicate that these behavioural tendencies play a meaningful role in shaping investment outcomes. The study highlights the importance of recognizing psychological influences in financial decision-making and encourages investors to adopt more disciplined and analytical approaches. By increasing awareness of behavioural biases, investors can improve their long-term strategies and make more balanced investment decisions.