Abstract:
Aim of The study: Behavioral finance is an emerging field of finance which is a
combination of finance and psychology. This paper focuses on the behavioral factors that
influence the decisions of indiviudal investors and their performance regarding investment at
karachi stock exchange.
Method: This study is based on primary data with a sample size of 119 individual investors
from karachi stock exchange. Exploratory factor analysis is applied on the very first stage to
extract those variables that have impact and to grouped them in suitable factors. One sample
t-test and correlation test applied on four behavioral factors to check the level of impact and
influence on individual investors’ decisions and their investment performance.
Results: The findings reveal that the extracted variables that have eigen value greater than 1
are grouped into four behavioral factors. These four behavioral factors have significant
impact on individual investors decisions and positive but low influence on investors’
performance regarding investment.
Practical Implications: This study would be useful for the individual investors to better
understand the behavioral variables and their impact before taking any serious investment
decision. Furthermore, this research would be also helpful for the financial institutions to
predict the investors’ decisions and can provide them better recommendations. This research
is also providing a valuable chance to the researcher to learn more about traditional finance
and in detail about behavioral finance.
