Investors’ Behavior and Equity Investment Decision: An Evidence from Nepal

Abstract

Behavior is the psychological phenomenon/aspect of the individuals, and investors’ behavior influences investment decisions. The research examined the influence of investors’ behavior on equity investment decisions based on quantitative research philosophy and utilized descriptive cum analytical research design. The sample was 400 individual investors from the top ten brokerage firms, with 40 investors who made equity investment decisions in the Nepalese stock market using a first-come-first-basis with readiness to respond to the survey questionnaire. Data were collected from a 5-point Likert type with a self-administered closed-end structured questionnaire from 293 respondents. Descriptive and inferential statistics were applied in analyzing data, including correlation coefficient and multiple regression analysis. The results indicate that investors’ behavior is a significant factor in equity investment decisions. However, gender is not an influencing factor. Hence, the financial market may not always be guided by fundamental principles of standard finance but is largely influenced by investors’ irrationality and behavior. Then, it leads to excessive trading of securities, selling to gain portfolios, and overreaction and underreaction in the marketplace. Therefore, investors’ irrationality can be abated through training, professional advice, investment goal, and implementation of behavioral finance courses at professional and academic institutions.