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Impact of Behavioral Factors in Making Investment Decisions and Performance: Study on Investors of National Stock Exchange

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  • Sarika Keswani
  • Vippa Dhingra
  • Bharti Wadhwa

Abstract

Market anomalies and irrational behavior caused investors changes in the stock market, and this has led to an investigation into the impact of various behavioral biases and factors affecting decision-making for individual investors. The purpose of this study was to find out the effect of the four factors, heuristic, prospect, market, herding on decisions of investors at NSE. Data are collected from the questionnaire on the basis of a likert scale. To determine the reliability of the questionnaire, the Cronbach alpha factor, which was 0.728, was used. EFA and multiple regression tests have been applied. Cronbach-alpha was used to check the interal consistency of the element. Cronbach alpha emphasized to each factor- Heuristic, Prospect, Market, Herding, Investment performance and Investors decisions that consistency at an acceptable level. The result of the analysis is that the four variables have greatly influenced the investment decision and return on investment. All behavioral variables have a significant impact on the decision-making process of investors, which led to the acceptance of all assumptions regarding the level of influence of behavioral factors in decision making for individual investors.

Suggested Citation

  • Sarika Keswani & Vippa Dhingra & Bharti Wadhwa, 2019. "Impact of Behavioral Factors in Making Investment Decisions and Performance: Study on Investors of National Stock Exchange," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(8), pages 1-80, August.
    • Handle: RePEc:ibn:ijefaa:v:11:y:2019:i:8:p:80
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    References listed on IDEAS

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    1. Nelson Maina Waweru & Evelyne Munyoki & Enrico Uliana, 2008. "The effects of behavioural factors in investment decision-making: a survey of institutional investors operating at the Nairobi Stock Exchange," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 1(1), pages 24-41.
    2. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    3. Tan, Lin & Chiang, Thomas C. & Mason, Joseph R. & Nelling, Edward, 2008. "Herding behavior in Chinese stock markets: An examination of A and B shares," Pacific-Basin Finance Journal, Elsevier, vol. 16(1-2), pages 61-77, January.
    4. Rockenbach, Bettina, 2004. "The behavioral relevance of mental accounting for the pricing of financial options," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 513-527, April.
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    Cited by:

    1. Roshani Chamalka Gunathilaka & J. M. Ruwani Fernando, 2021. "Do behavioral biases differ among institutional and individual investors?," Oblik i finansi, Institute of Accounting and Finance, issue 2, pages 61-73, June.
    2. Candy & Guseriwan, 2020. "Investment Decision Making of Institutional Investor: What is Behind It?," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 4(6), pages 435-438, June.

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    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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