Evidence of Behavioural Biases in Financial Consultants and Investors

Abstract

This study aimed at identifying the behavioral biases causing unreasonable behavior of Financial Consultants and investors. The results of literature research identified several behavioural biases of Financial Consultants and investors irrational. This study tested three behavioural biases and established that behavioural biases which are overconfidence bias, illusion of control bias. And the effect of these behavioural biases on the financial decision making of financial Consultants and investors is also investigated. Data was collected through questionnaire from a sample size of 400 respondents consisting 400 respondents comprising halfi.e 200 no Financial Consultants and half i.e. 200 investors. Different statistical tests were applied such as correlation, Independent sample T-test, Chi-square for association and regression analysis to analyse the presence of behavioural biases and how these behavioural biases affect the decision making of two sample groups . . The results of the study revealed that the financial Consultants are more prone to the behavioural biases than the investors at the Pakistan stock exchange and these behavioural biases affect significantly different the financial decisions of financial Consultants and investors. Confirmation biases is common between the financial advisors and investors.