Role of Behavioral Factors in Share Market Investment Decision Making

Abstract

Investment behavior of individual investors in the share market highly influenced to variety of psychological factors. All the psychological factors highly contribute for investors’ decision of allocating the surplus financial resources for different instruments and stocks in the stock market. Major psychological bias broadly classified as Heuristic Bias, Prospect Bias, Market Bias and Hardening Bias. But, in this study authors concentrated in detail to investigate the impact of Heuristic bias on the investment decision making of Indian share market investors with special focus on the representativeness, over confidence, anchoring, gambler’s fallacy and availability bias. 375 share market investors selected from different geographical areas and different share broking houses to answer structured questionnaire but response received for 310 questionnaires. Also, share broker, financial experts and regular investors informally interviewed to get in-depth knowledge on the issues related for influence of psychology on investment decision of individual investors of share market. Different behavioral variables in this study have been justified on the basis of respondents’ age, gender, geography, kind of investor, recourses for investment, amount for investment etc. Indian share market investment lagging behind just with the participation of not more than 6% of the total population due to several issues, one among is failure of both investor and share service providing agencies to understand the influence of behavioral issues and its impact on investment decision. Final justification in the present empirical paper draw by applying different statistical techniques like chi-square test, factor analysis, co-relation analysis and ANOVA techniques of SPPS 20. This research attempt may be highly helpful for both the investors and financial service providers to reconstruct strategies after considering behavioral issues and its impact on investment.