How do emotional intelligence and behavioral biases of investors determine their investment decisions?

Abstract

Purpose In earlier studies, research has shown that EI is the only element, which influences the ways in which people develop in their lives, jobs and social skills control their emotions and get along with other people. It is EI that dictates the way people deal with one another and understand emotions. The research gap is to explore the impact of behavioral factors and investors psychology on their investment decision-making. Design/methodology/approach The information was gathered from 500 financial specialists. The region of research was the financial specialists who contribute through LSC Securities Ltd. in Punjab State. The purposive testing system was used in this examination. Findings The investigation found that the positive connection between the conduct predispositions of the financial specialists and venture choices of the speculators and positive connection between enthusiastic insight of the financial specialists and their venture choices. Yet, the authors found that the enthusiastic insight better foresees the venture choices of the financial specialists than the conduct predispositions of the speculators. Among the different elements of conduct inclinations of the speculator’s lament and carelessness are identified with the financial specialist’s venture choices. Among the various estimations of eager understanding – care, dealing with emotions, motivation, empathy and social aptitudes are related to the hypothesis decisions of the monetary pros. Research limitations/implications The sample selection was based on purposive sampling, rather than a random probability sample. The sample was area specific, restricted only to Ludhiana Stock Exchange in Punjab state. Therefore, the results of the study cannot be generalized with certainty to all the investors investing through other exchanges in other states. The inferences are based on the assumption that the data provided by the investors are true and correct. The findings may be relevant for other stock exchanges as that of the Ludhiana Stock Exchange. However, the authors do not claim the generalization of the results. Practical implications This study also helps to understand the relationship between investment decision-making and risk tolerance of investors. It will helpful for the financial advisors to know the behavioral biases of investors while making an investment decision, and therefore, they can advise investors properly to mitigate such biases. It may help the investors in understanding the subjective part of their behavior and control their emotions while taking decisions for their investment in stock market options. Social implications This research will help investment advisors and finance professionals to judge investors’ attitudes toward risk in a better way, which leads to better investment decisions. Originality/value This study is my own study and it is original and has not been published anywhere.

Challenges of Integrating Emotion into a Theoretical Framework in a Higher Education Investment Course

“…One of the causes of these biases is the emotional reaction of the investor when the market is volatile (Hameleers, 2021;Rau, 2015;Zahera & Bansal, 2018). Moreover, behavioural biases and emotional intelligence affected the investment decision (Raheja & Dhiman, 2020). Therefore, this paper's emotional knowledge means the set of knowledge to avoid behavioural biases such as the disposition effect, status quo bias, and endowment effect.…”

The role of behavioral bias on financial decision making: a systematic literature review and future research agenda

“…Most of the articles used are based on primary data, a quantitative approach using surveys. Multiple studies using secondary data through the database (Raheja & Dhiman, 2020); (Shah et al, 2018); (Ahmad & Shah, 2022); and (Mushinada & Veluri, 2018).…”

“…A number of studies related to this have empirically proven the effect of behavioral bias on financial decision making. For example, several studies that show how behavioral biases can influence investors' decisions, among others, were carried out by (Chhapra, Kashif, Rehan, & Bai, 2018); (Zahera & Bansal, 2018); (Raheja & Dhiman, 2020); (Jain, Walia, & Gupta, 2019); (Shukla, Rushdi, & Katiyar, 2020). Research on behavioral bias has become a topic of discussion among researchers in the last few decades.…”

Pengaruh Bias Perilaku Terhadap Pengambilan Keputusan Investasi Saham Para Investor Pemula Di Kota Sidoarjo

“…Herding bias di pasar keuangan didefinisikan sebagai kondisi dimana seseorang tidak dapat membuat keputusan sendiri sehingga mereka melakukan apapun yang dilakukan oleh sebagian besar orang (Raheja & Dhiman, 2020). Sebagaimana dijelaskan oleh Kumar & Goyal (2015) bahwa herding adalah perilaku dari banyak investor yang melakukan transaksi pada satu saham diarah serta diwaktu yang bersamaan.…”