An Empirical Study on the psychographic factors influencing financial decisions of informed individual investors, with special reference to Bangalore financial market

An Empirical Study on the psychographic factors influencing financial decisions of informed individual investors, with special reference to Bangalore financial market

Behavioural finance has been emerging as a significant discipline in academia as it speaks about the irrational behaviour of investors. Behavioural finance is the combination of classic economics and finance with psychology and decision making sciences. It is the study of how investors systematically make errors in judgment, or mental mistakes.Specifically, behavioral finance has two blocks: cognitive psychology and the limits to arbitrage. Cognitive refers to how people think. There is a huge psychology literature documenting that people make systematic errors in the way they think: they are over confident they put too much weight on recent experience etc. Their preference may also create distortions. Behavioural finance uses this body of knowledge, rather than taking arrogant approach that it should be ignored. Limits to arbitrage refer to in what circumstances arbitrage force will be effective, and they wont be. An Empirical Study on the psychographic factors influencing financial decisions of informed individual investors, with special reference to Bangalore financial market, has done with the objective of identifying the effect of three major anomalies namely over confidence, fear of loss, and effect of information and media and relationship of age and fear of loss on the investment decisions. Primary Data collection has been done with the help of questionnaire and had a sample size of 242. The above three aspects have studied and proved using various statistical tools like chi square, one sample t test, ANOVA and correlation. From the study it was proved that investors are overconfident but at the same time there is high fear of loss as well. Study shows that effect of information and news stories plays a major role in investment decisions. Age and fear of loss also have a significant relationship. Only 3 Anomalies has been considered for the study, considering the remaining will give further scope of research.

J Lakshmi

Commerce