Investment in Stock Markets: A Survey of Behavioural Biases of Individual Investors

Abstract

Behavioural finance refers to the application of socio-psychological theories along with financial theories to describe the patterns of financing that are less rational and objective. The premise of studying behavioural finance is that the presumption of rationality takes a back seat due to psychological biases leading to suboptimal decision making. Such anomalies of a large number of investors put together may disrupt the health of the market and consequently the whole economy. This paper attempts to highlight the anomalies present in the investment decision making of individual investors. A survey was conducted via a questionnaire which was responded to by 63 individuals. The results indicated the presence of confidence bias, loss aversion bias, and familiarity bias largely influenced the investment decisions of the respondents. Respondents perceived their psychological attribute of averting losses to be their most prominent disruption to healthy investment. The pandemic covid-19 did not seem to discourage the investors, they either maintained their investments or demonstrated an increase. This study was in the nature of a pilot survey to assess the current scenario of investment with many leads opening up towards testing established theories and/or creating fresh models that explain the nuances of investment behaviour.