The Impact of Behavioural Factors on Investment Decision Making and Performance of CSE Investors in Eastern Province of Sri Lanka

Abstract

Objectives of the study are twofold; first, to identify behaviour of CSE investors in Eastern province of Sri Lanka; second, to examine how behavioural factors impact on investment performance of CSE investors in the province. The research was conducted from positivism perspective and deductive reasoning was used as research approach. Survey strategy was applied to collect data and time horizon was cross sectional. Proportionate stratified random sampling technique was applied to choose the sample from the districts. Data were collected via questionnaires from 374 investors of CSE in the province. Mean, standard deviation, correlation and multiple regression were applied. Results show that all four behavioural factors and investment performance have fallen to moderate levels. According to Heuristic variables, investors rely on their skill, knowledge and previous experience. The investors mostly avoid loss and regret in investment on stocks as per the Prospect variables. Out of Market variables, the investors carefully consider the price changes of stocks while moderately analyse the companies’ customer preference. In line with Herding variable, the investors also follow others’ decision to invest. Heuristic variables are positively related with investment performance while other variables namely prospect variables, market variables and Herding variables are negatively related with investment performance. Recommendations are given to current and potential investors as well as executives in the stock market for promoting investment in stock exchange.