The Influence of Behavioural Biases on the Decision of Investors; Empirical Investigation From Pakistan Stock Exchange

Abstract

In Investment getting high rate of return is totally depending on the Rational decision making because rational decision making gives the surety of the successful return of the investment, especially in the stocks. Mostly investment decision making is affected by some different factors some are related to psychological factors, and some are behavioral factors. It is difficult to make the investment decision making in a rational way, researchers are trying to identify the factors that influence the investors behavior about the decision-making process. For the rational successful decision making the investors have tried so many traditional methods but at the end the unsatisfactory result. However, the behavioral finance has identified these types of the factors which affects the investment decision making of the individual investor. Thus, this study aim is to evaluate these types of factors which affects the investment decision making of the investor in the stock exchange market. The three factors have been selected and used to identify the impact of the on the individual investment decision making. These factors are included Overconfidence Bias, Availability Bias, Representativeness Bias. The structured closed ended questionnaire is selected for collection of data from the individual investor which is known as 270 Respondents. This study shows that all three factors have a positive impact on the investment decision making. That’s means the results are significant. This study assists the investor to make the rational decision making in the stock exchange market