Extending the Theory of Planned Behaviour: Impact of Past Behavioural Biases on the Investment Decision of Indian Investors

Abstract

Manuscript type: Research paper. Research aims: This paper aims to investigate the applicability of the Theory of Planned Behaviour (TPB) in examining individuals' behavioural intention to invest in the capital market. This study extends on the TPB model by considering the role of past behavioural biases (PBB) as a factor in influencing the individuals' behavioural investment intentions. Design/ Methodology/ Approach: This paper employs a hypothesis deductive approach. The research model is tested through structural equation modelling (SEM). Data were collected from 396 individuals in Eastern India through a survey and then analysed. Research findings:The results of this study demonstrate the applicability of the TPB in predicting the individuals' behavioural intention to invest in the capital market. This study indicates that attitude toward behaviour, subjective norms and perceived behavioural control are significantly associated with behavioural intentions. The findings signify that the inclusion of past PBB can improve the predictive power of the model. behavioural intentions. It also extends the applicability of the TPB in the area of investment decision making. Practitioner/ Policy implications: The findings of this study reveal that behavioural biases are inseparable from normal human beings' decision making. The reason is because behavioural biases can distort the individuals' fundamental valuation of stocks. Therefore, it is imperative that fund managers incorporate this dimension as part of their risk modelling to enhance investment analysis and strategies. The outcome of this study can be used as a guideline for understanding the factors and programmes that need to be instilled to increase online stock trading among current and future investors. Research limitation:This study is limited to non-financial sectors due to measurement limitations.

The Effect of Attitude, Subjective Norms and Control of Behavior Towards Intention in Share Investment

“…Subjective norms are influenced by various parties related to the individual concerned. Related parties become a source of reference in making decisions (Raut et al, 2018). These parties can come from colleagues, family and financial expert opinion.…”

“…Scholars as the younger generation who also play a role in the development of economic activities in the future, so it is necessary to know the interest of scholars in purchasing shares. Research Raut et al, (2018) revealed that stock purchases can be influenced by attitudes, subjective norms, behavioral control, and past experience bias. The act of investing is also related to the interest in investing.…”

Multidimensional Risk and Religiosity Towards Indonesian Muslims’ Sharia Investment Decision

“…Previous studies have also shown that an individual's investment behaviour is associated with risk attitude (Annamalah et al, 2019;Gakhar, 2019;Kemp, Chan, Chen, & Helton, 2018). Raut, Das, and Kumar (2018) found attitude towards risk to be the most significant predictor for the investment intention of Indian investors. Those who could afford to lose and were willing to take financial risks had favourable attitudes towards investment and were more likely to invest (Raut, Das, & Kumar, 2018).…”

“…Raut, Das, and Kumar (2018) found attitude towards risk to be the most significant predictor for the investment intention of Indian investors. Those who could afford to lose and were willing to take financial risks had favourable attitudes towards investment and were more likely to invest (Raut, Das, & Kumar, 2018). Gakhar (2019) noted that risk attitude has a significant difference in medium-risk investment instruments taken by investors.…”

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“…Previous studies have shown that attitude towards a financial product (e.g. Sukuk) have a positive impact on investors' intention (Ashidiqi, & Arundina, 2017;Raut, Das, & Kumar, 2018) and intention to use sukuk (Warsame, & Ireri, 2016). The researchers strongly argued that attitude is one of the important factors that influences the intention of an investor.…”