The Impact of Self-Serving Bias on Selection of Stocks by Retail Investors in Equity Market: A Study of the Urban Middle Class of India

Abstract

The field of standard finance states that an equity market investor acts as a judicious individual who is capable of dealing with all forms of data in a fair-minded way. On the other hand, the rapidly evolving field of behavioral finance relies upon true experience expressing that any and every equity market investor has his own set of inclinations which most of the times are unreasonable. Thus, feelings and behaviour have assumed a significant position in the sort of investment decisions embraced by equity market investors. For quite a long time, financial therapists and social experts have stood up in opposition to the principles of standard finance and managerial economics, contending that individuals do not behave logically every time and it is asking for way too much to expect investors to become utility-expanding players in a market which is not efficient in reality. The area of knowledge called as behavioural finance emerged in the early stages of 1970s in order to resolve such matters and collect a broad number of instances when individuals deliberately act "unreasonably."

The Interaction Between Cognitive Biases and the Cultural Dimensions of the Country in Individual Investment Decisions

“…In one of these studies, Chin et al (2018) examined the relationship between self-serving bias and "better-than-average influence (BTA)" and found that investors with this bias had a higher degree of better-than-average influence and traded more than those who did not. In another study conducted in India, Shukla et al (2022) examined the relationship between investors' selfserving bias and stock selection.…”

Should I invest or not? Investigating the role of biases and status quo

“…investors' decision-making and intention to invest are significantly influenced and driven by the investors' status quo (Shukla et al, 2022).…”

“…While trading is usually for a short period with unexpected early returns (Zahera and Bansal, 2018), the tendency to earn early returns are further impacted by bias, which varies based on the investor’s behaviour (Talwar et al , 2021). It is also recognised that investors’ decision-making and intention to invest are significantly influenced and driven by the investors’ status quo (Shukla et al , 2022).…”