IMPACT OF BEHAVIORAL BIASES ON INVESTMENT DECISIONS: A STUDY ON SELECTED RISK AVERSE INVESTORS IN INDIA

Abstract

In past two and half decades a paradigm shift has taken place in the field of financial economics from
standard finance to a new field of finance named as Behavioral Finance. Behavioral Finance enriches
the standard finance theories or models by giving insights from psychology, neuroscience, sociology,
organisation behaviour and law and explains how the cognitive errors and emotions of investors
influences their decision making process. Behavioral Finance is an emerging field that combines the
understanding of behavioural and cognitive psychology with financial decision making process. It is
the fastest growing area in the field of academic research in finance. This paper investigates whether
behavioral biases are evident among Indian risk averse Investors or not and which bias is most
prominent among risk averse investors.