Understanding the Behavioral Finance: Analysis of Investment Decisions of Investors

Abstract

Behavioral financing is an evolving field that studies how psychological factors affect decision taking under uncertain conditions. Behavioral finance is one of the important topic for us to know about the mindsets of the people about how they think of various things when they invest in various investment avenues. Through this research we came to know about the mentality of the people while they invest in various investment avenues. I.e. what do they think while investing.  This paper seeks to find out the major influence of certain behavioral finance concepts such as overconfidence, perception, Representative, anchoring cognitive Dissonance, Regret Aversion, narrow framing and mental accounting on the decision-making process of individual investors in stock market. We conducted primary research by framing a structured questionnaire and by collecting sample of 201 investors of Jakarta. The primary objective was to know effects of behavioral financing on investors and to study the impact and relevance of behavioral financing in investment decision of investors. Whereas secondary objective of our study was to know factors influencing the investors while investing and to study the concepts of behavioral financing and various theories related to it.