Financial decision making is generally characterized by high degree of risk, uncertainty as well as complexity. Decision making in financial markets takes under consideration a stack of factors including personal, technical and situational factors and above all it necessitates an understanding of human instinct on the top of financial skills. In the broad arena of literature, research studies have proposed two primary themes of decision making-one is the rational approach and the another one is irrational or bounded rationality approach. Rational world presupposes being reasonable in every aspect and making unbiased decisions. Irrationality approach contents that investor behaviour is driven by emotions even if they are well informed. This research paper by using the relevant literature in the field of behavioural decision making and investor psychology, provides an overview of these two distinctive academic doctrines, which clears the way-out that how in actual world people undertake their decision making. Furthermore, this research paper reviews how behavioural biases can lead to errors in investment decision making.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.