Perspective of the Behaviour of Retail Investors: An Analysis with Indian Stock Market Data

Abstract

Human bias influences the stock market for a long time. These behaviours are currently being studied under behavioural finance. The current paper tries to understand the behaviour of the Indian retail investors in face of uncertainty in the market. This paper uses a schedule of 25 statements which were used as expressed behaviour. There were five latent behaviours. A total of five hundred retail investors were surveyed in the four parts of India, namely north, south, east and west with the help of stock broking house in order to reach the target group. The result was then put to factor analysis. The study shows that there are six factors namely regret, followed by panic, cognitive dissonance, herding, anchoring, and heuristics. Interestingly, the herding and panic are actually resulted from a deep regret which the retail investors to panic and herd. Despite this retail investors use Anchoring and Heuristics in Investment Decisions. The market is also a victim of cognitive dissonance which keeps retail investors from entering the market.