Exploring the Role of Emotions and Psychology in Financial Investment Decisions in Indian Securities Market

Abstract

The investment decision-making process has become a very complex task in the present information age the purpose of this research work to prepare demographic profile of investor and investigate the psychological and emotional factor and their influence in equity investment decision-making in Indian security market. The paper collects data from a comprehensive survey conducted among 347 Indian security market investors in Agra and Uttar Pradesh city of Mathura. This paper used descriptive statistics, chi- square test, , ANOVA test(F-test) Cluster analysis  to analyze the investor emotional factor and segmenting the investor according to their emotional factor and test the interrelatedness and influencing in decision making. Finding reveals that investor prefers to invest in equity investment. Investor investment pattern are closely associated with level of income and education of respondents. Five emotional factors (Indecisive emotion, Clueless Emotion, Paranoid Emotion, Enthusiastic Emotion and Dogmatic Emotion) were identified and cluster analysis indicates that majority of respondents (103) are influenced from  enthusiastic emotion . Study indicates that all of these factors have demonstrated a significant contribution to dividing investors into five segments based on emotional influence. This paper helps to understand rising emotional factors of investors and shows the path to Indian stock market growth. Indian Stock Market is a very complex and volatile market where investor emotion plays an important role. Fund manager need to follow the permutation and combination of various psychological and emotional factor to enhance the equity investment and better market performance. There is a lack of research in emotional factors and their role in behavioral finance in Indian security market. This paper tries to address the disparity by examining emotional factors in the Indian security market.