Impact of Selected Behavioural Bias Factors on Investment Decisions of Equity Investors

Behavioural finance is a new discipline in finance, which studies the cognitive psychology of an individual's money-related decisions. It has evolved as a response to standard economic theory, which presumes that people are rational, risk-averse and profit maximisers. This concept of the rational individual formed the base for numerous theories about the capital markets. But the reality is that all individuals are far less rational in their decision making than the economic theory takes over. Individual's investment decisions is a complex procedure which controls logic, abstract thought and planning qualities. Based on the influence of these attributes, individual's investment decisions are emotional, fast and automatic. This study is intended to find out the impact of behavioural bias factors on investment decision of equity investors. Retail investors who access the Indian equity market from the Tamil Nadu state are taken as respondents for this survey. By utilizing the broad critique of literature, six behavioural bias factors are identified to find out its impact on investors' investment decisions. They are mood, emotions, heuristics, frames, personality and gambling. This study also examines the relationship among these behavioural bias factors. Descriptive research is utilized to identify the factors that influence investors' investment decisions. This research involves the use of both secondary and primary data. The secondary data includes the selection of broking firm and primary source of data is collected by using well-structured and non-disguised questionnaire. The multistage random sampling technique is applied to select respondents. The data are collected from the retail investors who access Indian equity market from the chosen area of Tamil Nadu. Cronbach's alpha is used to find out the reliability of the constructs. The findings of the Cronbach's alpha test reveal that the reliability of the study variables is greater than the threshold value of 0.6. Besides, Composite Reliability of all the variables is larger than the reference value of 0.6. The gathered data are analyzed quantitatively by using several statistical tools. Conceptual Model is developed by using Structural Equation Modeling (SEM). The findings of this study reveal that all the selected behavioural bias factors have shown significant influence of investors' investment decisions. The result of the impact of interdependence among the behavioural bias factors reveals that, except mood factor, all the factors have shown a strong relationship with other factors.